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UK unemployment rises for first time since mid-2015 as EU vote nears

The economists associated the slowdown in Britain's economy with the upcoming EU referendum.

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Britain is scheduled to vote on the EU referendum in June
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The number of people out of work in Britain rose for the first time since mid-2015 in the three months to February, the latest sign the economy is slowing as Britain gears up for a divisive referendum on its membership of the European Union.

The data also showed the number of people in work rose by just 20,000, the weakest performance since the three months to June last year.

Economists link a recent slowing in Britain's economy to uncertainty surrounding the June referendum as well as a slowdown in global growth. Britain created more than 200,000 jobs as recently as the last quarter of 2015.

"The combination of sub-consensus wage and employment growth was not encouraging, and may suggest that uncertainty surrounding the forthcoming referendum is starting to show up in the data," James Smith, an economist with bank ING, said.

Work and pensions minister Stephen Crabb said companies were putting big investments on hold due to Britain's uncertain EU future and hazy economic outlook.

"I'm not saying the increase in unemployment today is a direct result of that but it is an example of the kind of real gritty questions that those people who say Britain should leave the single market, they need to respond to that," he said.

The Vote Leave campaign hit back. Conservative lawmaker Penny Mordaunt said the unemployment figures were not "just statistics to be cynically dragged into the referendum debate." The Bank of England and the International Monetary Fund have recently said uncertainty about the referendum was hurting investment in Britain. Some economists have said a higher minimum wage introduced in April may also weigh on hiring.

A BoE survey released on Wednesday showed investment intentions among services firms and hiring intentions among consumer services companies were their lowest since mid-2013.

The Office for National Statistics data showed the number of unemployed people rose by 21,000 while the unemployment rate was steady at 5.1 percent for the fourth consecutive month. Workers' total earnings including bonuses rose by an annual 1.8 percent, slowing from 2.1 percent in the three months to January. Economists taking part in a Reuters poll had expected growth of 2.3 percent.

The BoE is watching for signs of stronger pay growth as it considers when to raise interest rates from their record low. Most economists expect no increase until next year. An ONS official said bonuses paid by banks were lower in February than in the same month last year.

Growth in earnings excluding bonuses remained at 2.2 percent, in line with forecasts in the Reuters poll. Pay rises had increased in recent months after lagging the economic recovery in early 2015. 

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