UK’s unemployment falls unexpectedly ahead of budget

British prime minister Andy Burnham has promised a 'clear guarantee of support' to young people, alongside 'big changes' to the way the welfare system operates. (EPA Images pic)

LONDON: Britain's unemployment rate fell unexpectedly in the three months to the end of August, official data showed Tuesday, boosting the Labour government ahead of its budget update next week.

The jobless rate dropped to 4.7%, its lowest level since the three months to end-July in 2025, the Office for National Statistics said.

Analysts had forecast that unemployment would remain steady at 4.9% compared with the three months to end-July 2026.

The data will be welcome news for prime minister Andy Burnham, who has set the stage for difficult decisions to be made in the Oct 28 budget presentation.

Rising youth unemployment remains a key concern for the government, which has made tackling the cost of living a key part of its agenda.

Burnham warned Sunday that Britain faced an "economic catastrophe and moral failure" owing to there being around one million 16- to 24-year-olds not in employment, education or training.

"We either invest in the success of our young people or pay for failure through the benefits system," Burnham wrote in The Times.

A government-commissioned review into youth unemployment, led by former Labour cabinet minister Alan Milburn, is due to publish its proposed solutions next month.

Burnham has promised a "clear guarantee of support" to young people, alongside "big changes" to the way the welfare system operates.

The government on Monday outlined plans to recruit thousands more apprentices under the age of 25 in sectors such as accounting, law and consulting.

"Signs that the labour market may be stabilising are welcome, but the recovery remains fragile and the government will not want to do anything that further discourages businesses from hiring," said Richard Carter, head of fixed interest research at Quilter Cheviot.

With inflation rising and government bond yields reaching multi-decade highs, finance minister John Healey, who will unveil the budget, has pledged to maintain strict fiscal discipline.