A critical issue that often goes unnoticed is the rising unemployment rate in Britain, which is the primary driver of the country's jobs downturn. While many assume that economic inactivity is to blame, the Resolution Foundation's latest report reveals a different story.
The Foundation's analysis, published on December 15, 2025, sheds light on the true state of Britain's labor market. It highlights that the decline in employment over the past 12 months and five years is entirely due to higher unemployment rates, not economic inactivity as commonly believed.
But here's where it gets controversial... The report challenges the dominant narrative surrounding economic inactivity. While it has been a hot topic in public debate, the Foundation's estimates show that labor market participation is actually above pre-pandemic levels, reaching a record high of 79.9% in 2023.
Economic inactivity, on the other hand, is slightly below pre-pandemic levels, with a 20.5% rate compared to the 2019 average of 20.8%. This is because, although there has been a concerning rise in health-related economic inactivity, it has been offset by decreases in inactivity due to family reasons and early retirements.
However, the real concern lies in the falling employment rate. The Foundation estimates that the UK's working-age employment rate has dropped by 1.0% since pre-pandemic levels, equivalent to 415,000 workers. This decline is solely attributed to higher unemployment, currently standing at 5%.
And this is the part most people miss... The report emphasizes the need to address the root cause of Britain's employment downturn - a lack of jobs leading to elevated unemployment. While exploring the reasons behind rising ill-health and disability is important, policymakers must not overlook the urgent issue of job scarcity.
The impact of this downturn is particularly felt by young people. The report highlights that long periods of unemployment can have scarring effects on their careers, a trend that has been consistent throughout economic downturns, including the post-financial crisis and Covid periods.
For example, the number of 18-24-year-olds in payrolled jobs has decreased by 1.0% in the 14 months leading up to September 2025, while the decline for 25-49-year-olds is much smaller.
The recent rise in unemployment can be partially attributed to the significant increase in employer National Insurance contributions last April. However, with forecasts predicting sustained high unemployment into next year and beyond, the government must take immediate action to support young people.
Nye Cominetti, Principal Economist at the Resolution Foundation, emphasizes the need for a renewed focus on supporting young people, stating, "While rising health-related inactivity is a significant problem, rising unemployment is the forgotten driver of Britain's current jobs downturn. Young people are once again at the heart of this downturn, and we must not let them down."
The report concludes with a call to action, urging policymakers and employers to redouble their efforts to support young people, including slowing the pace of minimum wage rises and extending job support schemes to a wider age range.
