UK jobless rate hits 13-year high

“Doubts and concerns over the strength and sustainability of any recovery are likely to encourage businesses to keep their labour forces as tight as possible.”

Youth affected

Data released by the Office for National Statistics also painted a gloomy picture for young people out of work, with just under one in five of 16- to 24-year olds looking for employment.

“More workers, particularly young workers, are paying a devastating price for the bankers’ recession and there is some way to go before unemployment stops rising,” Paul Kenny, general secretary of the GMB union, said.

The number of people claiming jobless benefits also rose by 24,400 to 1.61 million in August, the highest since May 1997.

The statistics office said that average earnings, including bonuses, increased by only 1.7 per cent in the three months to July from the year before.

Vicky Redwood, an economist at Capital Economics, said the slowing of pay growth was “most worrying”.

“Even if the recession is technically over, it will continue to feel like one for many people for a long time yet,” she said.

On Tuesday, Gordon Brown, the British prime minister, told a Trade Union Congress conference that public sector spending will need to be cut to tackle the country’s soaring debt.

Unions claimed cuts would prolong the recession and increase unemployment, but all political parties have accepted that there is little alternative.