DWF comments on UK labour market

UK

The UK labour market continues to cool against a backdrop of ongoing economic pressure.  The UK employment rate was estimated at 75.3% in April to June 2025.  This is above estimates of a year ago, and up in the latest quarter.  The UK unemployment rate was estimated at 4.7%, above estimates of a year ago and up in the latest quarter.

The estimated number of vacancies in the UK fell by 44,000 on the quarter, to 718,000, in May to July 2025 – the 37^th consecutive fall.  The downturn has spared few industries, with job vacancies falling in 16 of the 18 industry sectors.  According to official figures, UK businesses are pulling back on recruitment and choosing not to replace staff who leave, leading to the steep fall in job vacancies. This trend reflects growing caution among employers, likely driven by upcoming changes to employment legislation leading to uncertainty.  Further, employee numbers on payroll have fallen in ten of the past twelve months, with hospitality and retail experiencing the steepest declines.

Whilst this continuous decline in available jobs will be concerning to the Government they may take comfort that the decrease is not as steep as some predictions had suggested.

In April to June 2025, annual growth in employees’ average earnings in Great Britain for regular earnings was 5% and for total earnings was 4.6%.  Annual average regular earnings growth was 5.7% for the public sector and 4.8% for the private sector.  The higher labour costs driven by the employer National Insurance contributions hike in April this year creates a predicament for employers facing demands from employees for increased wages due to rising costs.

When navigating the current economic climate building a supportive workplace culture remains key.  Engaging employees and communicating openly, inspires both loyalty and resilience in a challenging market.