Biggest rise in UK jobless total for 17 years

The jobless total leapt by 164,000 to 1.79 million between May and August, the highest rise for 17 years, it was revealed yesterday, providing stark evidence that the economic slowdown is forcing firms to lay off staff.

Amid warnings that unemployment could reach three million, the Prime Minister, speaking at an EU summit on the financial crisis, promised that the Government would do all it could to protect jobs. He pointed out that, despite the 10 per cent increase, unemployment was higher in America, Germany, France and Italy than in Britain.

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The 1.79 million total out of work is the highest since 1999 and compounded the economic gloom on a day that the FTSE 100 Index's two-day revival came to a halt as it slumped by 7.2 per cent amid renewed recession fears.

Many of the losses have been in the construction industry which has been hit by the collapse in the property market. Mr Brown, though, cited a Government scheme to recruit loft insulators as one way of cutting joblessness – while combating global warming.

"We are training large numbers of additional people to do work in insulation and that will become one of the unemployment programmes that will grow over the next period of time," Mr Brown said. "So the need to meet climate change goals and cut people's gas and electricity bills will create work."

But Chris Grayling, the shadow Work Secretary, said the comments revealed "just how out of touch he is with what is going on in the real economy". He said: "If training people to lag roofs is the best suggestion he can make, then it doesn't say much for the challenges we face as a nation."

Critics also pointed out that government plans to recruit insulators would only cut about 2,000 people from the total dole queue.

As unemployment rose to its highest level for almost a decade, the number of people claiming jobseeker's allowance also increased by 31,800 in September to 939,900.

Numbers of jobs also slumped by 122,000 over the quarter to 29.4 million, while the number of people employed in manufacturing industry dropped to a record low of 2.87 million.

The number of people classed as economically inactive – including those on long-term sick leave – rose by 16,000 in the latest period to 7.89 million, more than 20 per cent of the working age population.

Unemployment is now on course to hit two million by the end of the year and an economist, Vicky Redwood, of Capital Economics, forecast that unemployment could hit three million by the end of 2010.

Yesterday alone 1,300 job losses were announced: 800 at Freescale Semiconductor, a US-owned computer chip firm based in East Kilbride, and 500 in Grimsby through the closure of a Mariner Foods factory.

Tony McNulty, the Employment Minister, last night acknowledged the statistics were "disappointing if not unanticipated" but insisted Government initiatives would "cushion the blow" to people who lose their jobs. He also said there were 600,000 vacancies in Britain. He told BBC Radio 4's PM programme: "We will have to see what the latest round of financial turbulence will bring in terms of jobs."

Brendan Barber, the TUC general secretary, said: "This is extremely bad news, and these figures do not even show the effects of the bank crash. After years when we could take reasonably full employment for granted, we are now in for grim times. This is the Government's next big challenge."

John Cridland, deputy director general of the CBI said: "These figures are worse than we expected. They suggest the fallout from the slowdown in the economy is being felt by individuals faster and sooner than thought."

In the Commons, William Hague, the shadow Foreign Secretary, said it was a "grim day" and claimed a Government promise of £100m to help retrain the jobless would work out at just £18 for each unemployed person.

Harriet Harman, standing in for Gordon Brown at Questions to the Prime Minister, told MPs it was a "serious moment" for the economy, but warned Mr Hague against "writing off" the British economy, which was made of "sterner stuff".