---
title: "UK unemployment falls to 4.7% while vacancies drop"
url: "https://etf.net/news/uk-unemployment-falls-vacancies-drop-2026-10-20"
published_at: "2026-10-20T12:02:30.750Z"
updated_at: "2026-10-20T12:02:30.750Z"
byline: "ETF.net Research"
---

# UK unemployment falls to 4.7% while vacancies drop

The drop beat forecasts for a rise to 5% and the pound rose, reinforcing a November Bank of England increase without making the case for a faster path after that.

By ETF.net Research. Published Oct 20, 2026.

Britain's unemployment rate fell to **4.7%** in the three months to August, the Office for National Statistics said on Tuesday, and the pound rose. Vacancies in the three months to September fell.

The ONS said that rate, for June to August, was down 0.1 percentage point on the quarter and on the year. Economists polled by Reuters had expected it to rise to 5%. It was the lowest rate since the three months to July 2025.

The ONS said some volatility remains in its survey, and that the focus should be on longer-term moves.

"While the labour market remains broadly flat in 2026, data from the latest quarter shows the employment rate edging up and a small drop in unemployment," said David Freeman, ONS deputy director of labour market statistics.

Regular pay, excluding bonuses, grew 3.7% on the year in the three months to August. That was 0.1 percentage point above the 3.6% in a Reuters poll, and Reuters said the previous reading had been revised up to 3.6%.

Total pay, including bonuses, also grew 3.7%, down from 3.9% in the prior period. Freeman said total pay has eased to its lowest rate in nearly six years. After consumer prices, regular pay was 0.8% higher than a year earlier.

Vacancies fell by 21,000, to 691,000, in the three months to September. The ONS said that was the largest quarterly fall since the first three months of this year, when vacancies also fell by 21,000, and the first reading below 700,000 since February to April 2021. The drop was mainly among smaller firms, which the ONS said may be holding off on recruitment because labour costs are higher.

An early count of payrolled employees rose by 13,000 in September and was still 66,000 lower than a year earlier. The claimant count, people receiving benefits principally because they are unemployed, rose to 1.701 million in September and has been rising since July.

The pound was higher after the figures. By 7:43 a.m. ET it bought $1.3341, up 0.3% from the prior close, and it was up 0.2% against the euro. Reuters attributed the rise to the labour data.

The Bank of England held Bank Rate, its policy rate, at 3.75% in September, by a 6-3 vote. Three members preferred a quarter-point rise to 4%.

The Bank said a protracted conflict in the Middle East had pushed energy prices higher, that inflation had risen to 3.1% in August against a 2% target, and that inflation was likely to rise further. Based on energy prices in mid-September, the Bank expected inflation to reach slightly above 4% in early 2027.

Reuters said money-market futures were almost fully pricing a quarter-point rise in Bank Rate on Nov. 5, meaning traders were treating that increase as nearly certain.

"The release reinforces expectations of a November hike, rather than making a compelling case in itself for a more aggressive path thereafter," said Nikesh Sawjani, senior UK economist at Lloyds.

The outlook for Bank Rate, he said, "continues to hinge primarily on developments in the Middle East, their implications for energy prices and whether higher costs generate second-round effects in domestic wages and prices."

September's inflation figures, due Wednesday, are the next test of the case for a November increase. Economists polled by Reuters expect consumer prices to have risen 3.4% in the year to September, from 3.1% in August.

Source: etf.net, https://etf.net/news/uk-unemployment-falls-vacancies-drop-2026-10-20. Please cite the page URL.