Britain’s unemployment rate rose to its highest level in nearly five years, at 5.1%, in the three months to October. Industry experts said the increase reflects the impact of Labour’s higher taxes on jobs. 

The latest figures published by the Office of National Statistics (ONS) estimated the number of employees on payrolls plunged by 38,000 – the biggest fall for five years – during November to 30.3 million. The ONS said average regular wage growth also pulled back again, to 4.6% in the three months to October, down from an upwardly revised 4.7% in the previous three months. After adjusting for Consumer Price Index (CPI) inflation, the wage growth was 0.9% higher. Liz McKeown, director of economic statistics at ONS, said: “The overall picture continues to be of a weakening labour market. The number of employees on payroll has fallen again, reflecting subdued hiring activity, while firms told us there were fewer jobs in the latest period.

“This weakness is also reflected in an increase in the unemployment rate, while vacancies remained broadly flat. The fall in payroll numbers and increase in unemployment have been seen particularly among some younger age groups.”

According to ONS figures, unemployment jumped by 47,000 for those aged between 25 and 34, while it was 28,000 higher for those aged 16 and 17. Across the market, vacancies fell slightly, down 2,000 to 729,000 between September and November.

Ms McKeown added: “Wage growth slowed further in the private sector, while increasing again in the public sector, reflecting the continued impact of some pay rises being awarded earlier than they were last year.”

David Belle, founder and trader at Fink Money, said: “You reap what you sow. That’s what Labour are now seeing. When you increase the cost of hiring so much, firms will hire fewer people and lay off people. It’s simple economics. But the Government doesn’t seem to get this.”

Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, said Labour’s raising of Employers’ National Insurance contributions had contributed to the ongoing rise in unemployment figures.

He added: “The number of people out of work continues to increase beyond predictions, at the same time as no new vacancies are being created. This is the pure and simple consequence of the tax on jobs and the overall failure of the economy under a government out of its depth.”

David Morel, CEO of London-based Tiger Recruitment, predicted that the figures will improve over the coming months due to a relatively benign Budget and the watering down of the Employment Rights Bill.

He said: “In the run-up to the Budget, businesses of all sizes put the brakes on hiring, with many larger firms looking to divert their operations overseas.

“Since the Budget, the permanent jobs market has definitely picked up. Businesses have concluded the Budget wasn’t as bad as it could have been and have started hiring again. Yes, the economy contracted in October, but the initial signs over the past fortnight are that confidence is starting to return.

“Another factor stimulating activity is the government’s watering down of some of the elements in the Employment Rights Bill, which has now scrapped day one protection for ordinary unfair dismissal in favour of a six-month qualifying period.

“This news in itself has contributed to an uptick in permanent hiring as firms feel more confident about taking on staff.”