UK Faces Sharpest Decline in Hiring as Cost Pressures and AI Disruptions Mount

The British labour market is experiencing an unprecedented slowdown, with hiring demand among UK employers falling to its lowest level in recent memory. A recent global employment outlook survey by ManpowerGroup, interviewing over 40,000 companies worldwide and 2,000 in Britain, indicates that only 11 per cent of UK businesses expect to grow their headcount in the final quarter of 2025. This marks the most significant year on year fall among all surveyed countries, with Singapore, Hungary, and Finland lagging behind by comparison.

Companies across the United Kingdom are contending with a ‘perfect storm’ of rising business costs, swift technological change through artificial intelligence, and persistent policy uncertainty ahead of the upcoming autumn budget. Business confidence has suffered as changes to employers’ national insurance contributions and escalating operational expenses have prompted a conservative approach to recruitment. While opportunities for highly skilled professionals persist, overall hiring prospects are dramatically reduced compared to the robust 30 per cent outlooks seen in early 2022.

Information technology continues to perform strongly, trailed by financials and property sectors. The consumer goods and services sector, however, has experienced the sharpest annual contraction in demand, while energy and utilities have posted the best quarterly growth figures. Managers are now analysing how to make the most of the talent they have, seeking greater efficiency through digital transformation rather than new hires. Demand for entry level roles is expected to stabilise, accounting for 61 per cent of all hiring into the year’s end as employers seek flexibility and cost management.

Pay growth has also decelerated across the economy, now at its slowest pace since December 2021, with average increases at just 3 per cent in the three months to July. The supply of candidates has risen in tandem with the slowdown in vacancies, especially for less experienced workers, as companies automate more routine tasks. It has shifted the balance of power firmly back to employers, with skilled candidates in high demand but less mobility for the broader workforce.

While the government points to improved business sentiment and recent job creation statistics, business leaders argue that meaningful relief from employment costs, streamlined policy timelines and bold investment in infrastructure and innovation are necessary to regain momentum and strengthen the UK’s competitive position. As the market undergoes this critical adjustment, both candidates and companies face challenging decisions on how best to prepare for the evolving economic landscape.