Rachel Reeves has been blamed for a jobs bloodbath as figures show 1,000 staff a day are being axed in the run-up to the Budget.
Tax hikes on employers have helped drive unemployment to the highest level in nearly a decade.
And experts warn the ‘madness’ of Labour‘s economic policies will only make things worse as the Chancellor prepares to unleash more pain later this month.
Figures from the Office for National Statistics (ONS) showed unemployment hit 5 per cent in the three months to September, the highest since 2016 – excluding the pandemic.
They also revealed a spike in job losses as the Budget approaches, with a 64,000 decline in the number of payrolled workers – or 1,000 a day – over September and October and 180,000 over a year.
It comes after Labour piled costs on businesses via its £25 billion national insurance raid – and as firms worry about a package of workers’ rights that is set to add to the headache.
‘This fall is a direct result of the recent increase in employer’s National Insurance contributions and the upcoming Employment Rights Bill,’ said Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors.
Ms Hall-Chen said the overall effect of the policies was ‘that hiring employees has become a costlier and riskier proposition for businesses’.
Fears are growing that Rachel Reeves will announce a further tax grab in the upcoming budget
Prime Minster Keir Starmer and his Chancellor have been criticised ahead of the Budget
Fears are growing that the Chancellor will announce a further tax grab in two weeks’ time as she seeks to repair a £30 billion hole in the public finances.
That could mean a manifesto-breaching increase in income tax that threatens to damage already-sluggish economic growth.
And businesses face another blow if, as feared, Labour also takes an axe to so-called ‘salary sacrifice’ schemes that allow them to reduce tax paid on contributions to workers’ pension pots.
Another steep rise in the minimum wage would dismay Britain’s beleaguered businesses too.
Simon French, chief economist at City broker Panmure Liberum, said it was ‘madness to be pressing on with the rights bill and above inflation increases to the national living wage at a time when the labour market is cooling rapidly’.
Tory shadow chancellor Sir Mel Stride said: ‘These figures confirm a jobs bloodbath under Labour – with 1,000 jobs lost every single day in the run-up to the Budget.
‘Keir Starmer and Rachel Reeves have taxed jobs, knocked business confidence and taken Britain back to pandemic-level unemployment. More tax rises loom. More damage to come. Labour’s failure isn’t an accident – it’s the result of their choices.’
Yael Selfin, chief economist at accountancy firm KPMG UK, said: ‘Hiring activity remains weak and survey evidence suggests that additional uncertainty from the Budget is keeping a lid on activity, as employers await the details of any fiscal measures.’
Tory shadow chancellor Sir Mel Stride (pictured) said the figures ‘confirm a jobs bloodbath’
Ms Reeves has been blamed as 1,000 staff a day are being axed ahead of the Budget
Figures show there is evidence of worsening long-term youth unemployment (stock image)
Former Bank of England rate-setter Andrew Sentance [CORR] said the Chancellor was ‘warned last October that increasing employer NI – the ‘tax on jobs’ – would stifle job creation and raise unemployment’.
He added: ‘With the unemployment rate up to 5 per cent, this is exactly what has happened, and there is probably more bad job news to come as employers adjust to higher NI.’
Britain’s hospitality and retail sectors were worst hit by the national insurance raid and on Tuesday, Kate Nicholls, chair of trade body UK Hospitality, said the latest figures were ‘a shocking indictment of the damage caused’.
Economists at Bank of America said that they expect to see more pain with up to £21 billion of immediate tax rises in the Budget – knocking as much as 0.2 percentage points off growth.
Tuesday’s dismal ONS figures also revealed that unemployment has risen by 349,000, or 24 per cent since Labour came to power last summer. At the time, the unemployment rate stood at 4.1 per cent.
They showed that redundancies are surging, with 134,000 coming in the three months to September – the worst three-month period for redundancies since 2021.
And even for those in work, stubbornly-high inflation is eating away at living standards, with pay growth in real terms – stripping out the impact of higher prices and housing costs – falling to just 0.5 per cent, the weakest since 2023.
On top of that, Britain’s sicknote epidemic shows no sign of abating with the number of people not working due to long-term ill health remaining at a stubbornly-high 2.8 million.
And there is evidence of worsening long-term youth unemployment.
The proportion of jobless 18-24 year-olds who have been out of work for more than a year rose to 26 per cent, the highest since 2015.
Liz McKeown, director of economic statistics at the ONS, said: ‘Taken together these figures point to a weakening labour market.’
Work and pensions secretary Pat McFadden (pictured) said in response to the ONS numbers that the government was ‘stepping up our plan to get Britain working’
The Bank of England has predicted that unemployment will rise but had not expected it to hit 5 per cent until later this year
Tory business spokesman Andrew Griffith said: ‘Labour ministers should hang their heads in shame.
‘The £25 billion NI hike, falling business confidence and threat of draconian union and worker rights have all contributed to today’s rise in unemployment to 5 per cent.
‘With young people most impacted, ‘generation jobless’ is now happening on their watch.’
The figures, which are likely to add to pressure for the Bank of England to cut interest rates next month, sent the pound lower against the dollar and the euro.
Work and pensions secretary Pat McFadden said in response to the ONS numbers that the government was ‘stepping up our plan to get Britain working’.
But the deteriorating jobs figure only adds to the catalogue of depressing economic numbers facing the Chancellor.
The Bank of England has predicted that unemployment will rise but had not expected it to hit 5 per cent until later this year.
Meanwhile, inflation has remained at a stubbornly high 3.8 per cent, nearly twice the 2 per cent level targeted by the Bank. That too has been blamed on Ms Reeves as her national insurance hikes were passed on to consumers in the form of higher prices.
At the same time, overall economic performance has been sluggish.
Official figures due on Thursday are expected to show a further slowdown in growth to 0.2 per cent in the third quarter of the year.
