UK unemployment has risen to its highest level in four years, according to new figures from the Office for National Statistics (ONS), with wage growth also continuing to slow. The data suggests increasing pressure on the labour market and may influence future decisions on interest rates.

The unemployment rate rose to 4.7 percent in the three months to May, up from 4.6 percent in the previous period. This is the highest figure recorded since June 2021.

At the same time, regular pay growth excluding bonuses fell to 5 percent, the lowest since late 2021. While still historically high, the slowdown indicates reduced wage pressure, which may ease inflation concerns.

Liz McKeown, director of economic statistics at the ONS, said the labour market is showing further signs of weakening. “The number of employees on payroll fell again, although revised tax data shows recent declines were less sharp than previously thought,” she said.

“Pay growth fell again in both cash and real terms, but both measures remain relatively strong by historic standards,” she added.

For business owners, the data reflects a shifting environment. On one hand, a softening labour market may relieve recruitment challenges and limit wage inflation. On the other, it points to weaker consumer spending and potential caution in investment and hiring.

The figures come shortly after Bank of England Governor Andrew Bailey suggested that the Bank could consider larger interest rate cuts if the labour market slows further. The current base rate stands at 4.25 percent, with the next review due in August.

Business leaders will be watching closely for signals of further changes to monetary policy and how these may affect demand, borrowing costs, and workforce dynamics in the months ahead.