UK Employment Hits 12 Year Low Amid Rising Costs and Uncertainty

UK employment levels have reached their lowest point in over a decade, driven by a combination of rising labour costs and global uncertainties. The most recent data from the Chartered Institute of Personnel and Development (CIPD) shows a sharp decline in hiring intentions among employers, marking the weakest levels outside the pandemic since 2014.

Private sector employers appear to be scaling back recruitment plans significantly, with a net balance of just 8% expecting to increase staff numbers in the coming months, down from 13% in the previous quarter. Large businesses, particularly in retail, have been the hardest hit, while public sector organisations, especially within education, are also struggling to maintain staffing levels.

According to the CIPD, 24% of employers stated they were planning redundancies over the next three months. These findings align with separate research from KPMG and the Recruitment and Employment Confederation (REC), which reported a notable decline in both permanent and temporary vacancies in April. The south of England recorded the greatest drops in permanent job placements, while London showed a slightly softer decline.

The data highlights a stark shift in the job market. Engineering remains one of the few sectors to show growth in demand for permanent roles, while industries such as nursing, retail, and hospitality recorded the steepest reductions. Temporary staff demand has fallen across all job sectors, compounding the challenging environment for workers and employers alike.

Increased costs related to the minimum wage and national insurance contributions, which came into effect this April, have also discouraged hiring. Temporary pay rates saw their sharpest rise in nearly a year, partly due to these mandated increases, though overall pay growth remains below historical averages.

Global challenges have further exacerbated employer confidence. A decline in BDO’s optimism index, a key measure of sentiment in manufacturing and services, fell to its lowest level since early 2021. The index recorded a sharp drop from 98.23 to 96.9 in April, its largest single-month decrease since October 2023 following renewed Middle East conflict.

BDO also reports that payroll employees fell by 78,000 in March, with vacancies now at their lowest level in four years. A combination of geopolitical uncertainties and financial pressures has resulted in businesses significantly pulling back on both recruitment and operational growth.