UK unemployment at 5.1% could rise further as firms face closing pressures

Independent.co reports UK unemployment reached 5.1 per cent in the three months to October — the highest level since the Covid period at the end of last year — and experts have warned it could surge further in 2026 as cost pressures force firms to close. Years of higher interest rates, rising employment costs, high energy bills and inflation pushing up raw materials and service costs have all contributed to extremely tough conditions for companies, the report says.

That combination might "kill off" so‑called zombie companies, one expert said — firms that have struggled on without growing — and Ruth Curtice, chief executive of the Resolution Foundation, said: "There are early and encouraging signs of a mild zombie apocalypse, where higher interest rates and minimum wages have combined to kill off struggling firms and leave the door open for new, more productive ones to replace them.

But while this is good news for our medium-term economic prospects, the short-term impact could be job displacement and higher unemployment. Policymakers will need to redouble efforts to address this problem." Two-thirds (67 per cent) of economists surveyed told the Times they expect unemployment to be between 5 and 5.5 per cent by the end of 2026; if it reached the top of that range it would be the highest since 2015 (5.6 per cent).

Key Topics

Business, Unemployment Rate, Ons, Zombie Companies, Resolution Foundation, Ruth Curtice