Jessica O'ConnorThe number of payrolled employees in the UK declined over the past year while unemployment increased, according to the latest labour market statistics from the Office for National Statistics (ONS).
Administrative data from HM Revenue and Customs (HMRC) indicated payrolled employment fell by 121,000 (0.4%) between December 2024 and December 2025, with a further monthly decrease of 6,000 between November and December 2025.
Early estimates suggested the total fell to 30.3 million in January 2026, down 134,000 year on year, although the figure is provisional and subject to revision.
For the October to December 2025 period – comparable with Labour Force Survey (LFS) estimates – payrolled employment declined by 130,000 (0.4%) over the year and by 46,000 (0.2%) over the quarter.
The employment rate for people aged 16 to 64 was estimated at 75.0% in October to December 2025, down on the previous quarter but unchanged compared with a year earlier.
Over the same period, the unemployment rate rose to 5.2%, higher both quarterly and annually.
Economic inactivity among those aged 16 to 64 was estimated at 20.8%, falling on the quarter and below levels recorded a year earlier.
The Claimant Count for January 2026 increased on the month but decreased on the year to an estimated 1.691 million.
The ONS noted that the latest monthly figure is provisional and may be revised as administrative records are updated.
Vacancies remained broadly stable, with early estimates for November 2025 to January 2026 showing a slight increase of 2,000 to 726,000 compared with the previous three-month period.
Average earnings growth in Great Britain was 4.2% annually for both regular pay (excluding bonuses) and total pay (including bonuses) in October to December 2025.
Public sector regular pay grew by 7.2%, compared with 3.4% in the private sector, partly reflecting the timing of public sector pay awards.
After adjusting for inflation, real earnings growth was modest. Regular and total pay increased by 0.5% using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), and by 0.8% and 0.7% respectively using CPI.
Industrial action also affected the labour market, with an estimated 118,000 working days lost to labour disputes in December 2025.
More than two-thirds of those lost days were in the health and social work sector, largely linked to doctors’ strikes in England.
James Cockett, senior labour market economist for the CIPD, said: “Unemployment has risen further and young people are bearing the brunt, with the unemployment rate among 18 to 24 year olds reaching its highest level since 2020.
“This is ahead of the significant uplift to the youth minimum wage rates, set to come into effect from April, further raising the costs of employing young people.
“It’s necessary for the Government to take greater action to support young people in securing training and employment opportunities. It can do this by introducing an Apprenticeship Guarantee for 16 to 24-year-olds, which is overwhelmingly supported by employers.”
He added: “While vacancies have slightly risen, redundancies remain high, highlighting the pressures employers currently face in a tough economic environment. It’s expected that the introduction of Employment Rights Act measures will further increase employment costs, adding to the subdued mood among employers.
“It’s vital that Government acts to mitigate against the unintended consequences of the reforms, such as a rise in temporary employment, by undertaking meaningful consultation with businesses and where necessary compromising on key measures still to be decided in secondary legislation.
“To support smaller businesses, the backbone of the economy, we need to see a major communication campaign from Government, to ensure they aware of, understand and can prepare for the new legal obligations prior to them coming in to effect.”
