At a glance...
• London’s unemployment total has hit an 11-year high as the hospitality and retail sectors are battered by Rachel Reeves’ National Insurance rise on employers in last year’s Budget
• The capital has the highest jobless rate in the country, official figures reveal
• Work Secretary Pat McFadden says the Government is seeking to get more people into jobs, particularly younger groups
London’s unemployment total has jumped to the highest for 11 years as Rachel Reeves’ National Insurance raid on employers pummels the hospitality and retail sectors.
The jobless tally across the country rose from 4.7% to 5% in the July to September quarter with almost 1.8million people classifying themselves as unemployed, according to latest data from the Office for National Statistics.
London had the highest unemployment rate of any region in the UK at 6.5%, up 0.5% since the previous quarter.
The capital has been hit particularly hard because of its large numbers of relatively low paid workers in hospitality and retail.
The 341,000 out of work was the highest since early 2021, and going back to 2014 if the pandemic which distorted jobless levels is excluded.
Payrolled jobs held by people living in London were down by 20,100, a bigger fall than any other region in both absolute and proportional terms.
On the grim jobless figures, shadow London minister Gareth Bacon said: “It is a direct consequence of Labour’s economically illiterate decision to raise employers National Insurance last year.
“Raising the cost of business has two direct and obvious consequences, inflation and higher unemployment, especially in sectors such as hospitality.”
Liberal Democrat London spokesperson Luke Taylor, MP for Sutton and Cheam, added: “Today’s news is dreadful for London as a vital engine of growth for our country.
"Instead of growing the economy, the Chancellor’s jobs tax has punished London's small businesses and pushed people looking for jobs in the capital out of work.”
Kate Nicholls, Chair of UKHospitality, blamed tens of thousands of job losses on last year’s Budget when Ms Reeves hit businesses with a £20 billion rise in NI contributions for employers.
“Hospitality has borne the brunt of these changes, with more than half of all job losses coming from our sector,” she said.
“If the Government wants to get more people back into work and revitalise high streets, it needs hospitality firing on all cylinders, but right now we’re being taxed out.”
One leading City economist said it was “madness” for Labour to be pressing ahead with the Employee Rights Bill and above inflation hikes in the National Living Wage at a time when the labour market is cooling so rapidly.
Simon French, chief economist and head of research at Panmure Liberum said in a post on X that the combined effects of a slew of extra employment costs, including the increase in employers’ National Insurance Contributions “is far too much to absorb in one go”.
The joblessness spike comes in the run up to the Budget on November 26 that many business leaders have complained has led to a slowdown in activity amid a slew of rumours about potential tax raising measures.
It makes a rate cut from the Bank of England next month a near certainty.
London and the South East face being hardest hit in the Budget as the Chancellor imposes tens of billions of tax rises with wealthier people set to bear more of the burden of the higher levies.
She is expected to slap 2p on income tax, possibly offset with a partial cut to National Insurance for employees on earnings up to around £50,000.
Employers have complained they are less likely to take staff on after the hikes in NI Contribution and the minimum wage, which came into effect in April after being announced in last year’s Budget.
Responding to the employment and jobless figures, Work Secretary Pat McFadden said: “Over 329,000 more people have moved into work this year already, but today’s figures are exactly why we’re stepping up our plan to Get Britain Working.
“We’ve introduced the most ambitious employment reforms in a generation to modernise jobcentres, expand youth hubs and tackle ill-health through stronger partnerships with employers.
“And this week we’re going further by launching an independent investigation that will bolster our drive to ensure all young people are earning or learning.”
The ONS said average regular wage growth also pulled back again, to 4.6% in the three months to September, down from 4.7% in the previous three months. Wages were 0.8% higher after taking inflation into account.
Wage growth is now the lowest seen since April 2022.
Professor Joe Nellis, economic adviser at accountancy firm MHA, said: It is clear that businesses are in ultra-cautious mode driven by uncertainty — uncertainty ahead of the Budget, ahead of the Employment Rights Bill, and around the future of work in an AI-driven world.
“For the Government, the timing is awkward. The figures land just two weeks before the Autumn Budget, and they sharpen the fiscal dilemma facing the Chancellor. The softening labour data will amplify calls for measures that support job creation, retraining, and business investment to prevent the slowdown from deepening.”
Sam Richards, CEO of pro-growth campaign group Britain Remade, said:“Rising unemployment is the inevitable result of an economy that’s been stuck in the slow lane for far too long.
“Britain won’t get back to strong, secure growth unless we make it quicker, easier and cheaper to build the infrastructure our economy depends on, from clean energy to transport and new homes.”
