Unemployment in the UK has risen to 5.2%, the highest level in nearly five years, official figures have revealed.

The Office for National Statistics (ONS) said the rate of unemployment was 5.2% in the three months to the end of December, the highest rate since the quarter to January 2021. This was in line with what economists had been expecting and was up from 5.1% in the three months to November.

Joblessness in the UK has steadily risen since 2022, and businesses have complained that tax rises by Rachel Reeves in her last two budgets have exacerbated this, with rises in national insurance contributions and the minimum wage causing particular issues.

In the three months to December, wages excluding bonuses increased by 4.2%, from 4.4% the previous month. In the private sector, pay rose by 3.4%, the lowest level in five years, while wages in the public sector rose by 7.2%.

Recent business surveys have suggested the jobs market is improving as companies renew their recruitment plans now that uncertainty around the budget in late November has lifted.

A report by KPMG and REC, the recruitment body, reported the smallest drop in permanent staff placements in 18 months, while a survey of chief financial officers by the Bank of England reported that firms expect to raise employment this year for the first time in five months.

Unemployment and wage growth are being closely watched by the Bank of England, as decides when next to cut interest rates.

The Bank has forecast that the unemployment rate will rise to 5.3% this year and that wage growth will moderate from 3.4% last year to 3.25% by the end of the year as inflation falls. At the its recent meeting earlier this month, the Bank kept rates on hold at 3.75%.