Data released on Tuesday indicated that wage growth slowed once further and that Britain’s unemployment rate increased to its highest level in more than ten years outside of the pandemic period, supporting investor predictions on a UK interest rate cut next month.
With the exception of the pandemic period, when it peaked at 5.3%, the unemployment rate increased somewhat to 5.2% in the final three months of 2025, the highest level since 2015. According to the Office for National Statistics, it exceeded a rate of 5.1% in the three months leading up to November.
After response rates fell too low during the epidemic, the ONS is currently revamping the poll used to compute the unemployment rate. Analysts claim that in recent months, the data’s quality has improved. Companies claimed the numbers demonstrated how Prime Minister Keir Starmer’s government’s policy reforms, particularly the tax increase for companies last year, had affected the labour market.
Before regaining some of those losses, sterling dropped more than half a penny versus the dollar. The odds of a quarter-point rate decrease by the Bank of England in March were placed at about 80% by investors, up from 65% on Monday.
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