The UK unemployment rate reached 5.0% in September, its highest level since 2021. This week, activity data also showed weaker-than-expected growth in the third quarter and a slowdown in September. PMI indices have been highly volatile in recent months, but suggest no significant change in the overall pace of growth.
Our analysis
Unemployment’s recent uptick comes alongside a slowdown in wages, which, excluding bonuses, are growing at their slowest pace since 2022.
With the UK’s 2026 budget expected to include tax hikes, investors are increasingly betting on the prospect of interest rate cuts. For now, inflation is still too high for the central bank to move aggressively, but if softer wage growth ultimately helps bring price pressures down, the BoE could deliver more than the three cuts currently projected by the end of 2026.
Written on November 14, 2025. Opinions subject to change. This document has no pre-contractual or contractual value. It is provided for information purposes. The analyses and/or descriptions contained in this document should not be considered as advice or recommendations from Lazard Frères Gestion SAS. This document does not constitute a recommendation to buy or sell securities, nor does it encourage investment. This document is the intellectual property of Lazard Frères Gestion SAS - 352 213 599 RCS Paris 25, RUE DE COURCELLES - 75008 PARIS
