Unemployment drops sharply as inactivity in jobs market rises

Katie Horne, banks relationship manager at Flagstone, said: “It is extraordinary to consider the contrast between the upbeat economic climate at the start of the year and the realities of an unpredictable geopolitical rollercoaster that’s now engulfing the world.

“Despite today’s dip, unemployment remains at highs not seen since the fallout from Covid and this high rate is bound to continue to dent business confidence. A persistently stubborn inflation rate will exacerbate affordability concerns. The outlook for businesses will only worsen if borrowing costs remain high and access to finance remains tight, resulting in less hiring, investment and growth.

“Consumers have been facing a barrage of financial pressures with no end in sight, as if the post-pandemic cost of living crisis has transitioned from temporary emergency to permanent state.

“Research by Flagstone and Opinium found that at the end of 2025, three in 10 (29%) UK adults had less money left after bills and essential spending than they expected at the start of the year. 68% of these adults cited higher-than-expected everyday costs as the primary cause. 48% believe it to be the case because their household’s income did not increase in line with increasing living costs, and 31% spent more than expected on essential expenses.

“A ray of light for savers in this geopolitical turmoil is that higher inflation may mean the Bank of England increases the base rate and therefore banks will raise the rate of interest on their savings products.

“A proactive approach to managing your cash savings will give you the best chance of maximising returns on our money while minimising your risk exposure by making sure your savings are covered by the Financial Services Compensation Scheme.

“Whether you’re managing your own spare cash or cash reserves, taking stock of your savings accounts and maximising the rates you can access is time well spent.”