Unemployment dipped slightly in the three months to August, yet business leaders lined up this morning to warn that Britain’s labour market remains fragile and to press the Chancellor to use next week’s Budget to ease the cost of taking on staff.

The latest figures from the Office for National Statistics put the jobless rate at 4.7 per cent, with wage growth of 3.7 per cent. Beneath those headline numbers, however, vacancies fell by 21,000 over the quarter, while the number of payrolled employees was 111,000 lower than a year earlier.

Patrick Milnes, Head of People and Work Policy at the British Chambers of Commerce, welcomed the modest improvement but said unemployment remained stubbornly high. “Businesses are suffocating under a mountain of costs which means expansion plans are being put on hold and young people are missing out on job opportunities,” he said.

According to BCC research, labour costs are now the biggest pressure on firms, cited by 69 per cent of them, and the organisation’s latest forecast suggests youth unemployment could reach 16.6 per cent by the end of the year. Any further tax rises on business, Mr Milnes warned, would be “calamitous for growth and jobs”. He wants employer National Insurance contributions cut for all under-25s, followed by a targeted package to relieve energy and business rate pressures.

The Institute of Directors struck a similar note. Alex Hall-Chen, its Principal Policy Advisor for Employment, described the labour market as subdued and blamed a succession of employment policies that had raised both the cost and the risk of hiring. “The labour market is unlikely to strengthen until the Government tackles this cost of employment crisis,” she said.

Without a reduction in costs and administrative burdens, she argued, ministers’ ambitions to raise employment and tackle the number of young people not in education, employment or training were unlikely to be realised.

The Institute of Economic Affairs took a more upbeat view. Its Chief Economist, Dr Valentin Boboc, called falling unemployment and rising pay encouraging, though he noted that the smallest businesses accounted for most of the net decline in vacancies, with employers pointing to higher labour costs as a brake on recruitment.

For the Bank of England, he suggested, stronger employment reduces the urgency to cut interest rates, while firmer wage growth deserves attention. “The key question is whether productive capacity is keeping pace with demand,” he said. Higher productivity, greater competition and fewer obstacles to building homes and energy infrastructure would, in his view, help sustain rising real wages.

That prospect of tighter monetary policy worries Dave Harris, chief executive of over-55s mortgage lender more2life. With oil above $100 a barrel and inflation climbing again, he believes the Monetary Policy Committee may feel compelled to raise rates at its next meeting – and stronger pay only adds to the pressure.

The squeeze, he said, falls hardest on people in their 50s and 60s, many of whom are still supporting children, paying off mortgages and trying to build up their pensions all at once. Pointing to Pensions Commission figures showing 15 million people are already undersaving for retirement, he warned that millions faced lower living standards in later life unless something changed quickly – though many had built up substantial wealth in their homes, giving them more options than they might realise.

Employers want relief, young jobseekers want openings, and those nearing retirement want rates left alone. The Chancellor has a week to decide whom to disappoint.