The number of Britons stuck out of work for more than a year has surged to its highest level since 2016, with small employers warning that successive tax rises and the looming Employment Rights Act are quietly choking off the next generation of hires.
Fresh figures from the Office for National Statistics show that 474,000 people are now classified as long-term unemployed — meaning they have spent more than twelve months out of work. It is the highest tally since January 2016 and an unwelcome milestone for a labour market that, until recently, had been a rare bright spot in Britain’s stuttering recovery.
The deterioration has been sharp. Since Labour swept to power in July 2024, an additional 129,000 people have tipped into long-term joblessness, a sobering measure of how Chancellor Rachel Reeves’s £26bn raid on employer National Insurance has rippled through payrolls, particularly in the SME-heavy retail and hospitality sectors that are the backbone of high streets up and down the country.
A cooling labour market with a long tail
For owner-managers, the headline statistic is alarming because of what economists call “scarring”. The longer a candidate is out of work, the steeper the climb back becomes — skills atrophy, networks fray and confidence drains. That, in turn, blunts productivity, erodes the tax base and dulls consumer spending, the very engine many small firms rely on.
Stephen Evans, chief executive of the Learning and Work Institute, did not mince his words. “Even if some of the rise is cyclical because of the weak economy, the risk is that should the economy pick up they’ll find it more difficult to get back to work,” he said. “Nipping long-term unemployment in the bud really is massively important for the prospects of the economy, as well as for those individuals.”
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