DWF comments on latest UK labour market statistics

Joanne Frew, Global Head of Employment & Pensions at DWF, has provided insights on the latest UK labour market statistics.

Joanne Frew says: “Latest labour market indicators point to a shifting economic landscape, with key employment metrics showing notable movement.  The UK employment rate was estimated at 75.1% in November 2025 to January 2026.  This is up in the latest quarter and above estimates of a year ago.  The UK unemployment rate was estimated at 5.2% in the same period.  This is up in the latest quarter and above estimates of a year ago.  Overall, these figures represent the ongoing challenges in the labour market.  Together, they paint a picture of an economy adjusting to structural pressures with increasing pace.

The estimated number of vacancies in the UK has remained broadly flat across recent periods, early estimates for December 2025 to February 2026 suggest a small decrease of 6,000, to 721,000, compared with September to November 2025.   This stalling also reflects a marked hesitation among employers to expand their workforce, driven by the heightened uncertainty and additional obligations created by the strengthened employment protections under the Employment Rights Act.  Vacancy levels are emerging as an early barometer of employer confidence in a more regulated operating environment.

Annual growth in employees’ average earnings in Great Britain was 3.8% for regular earnings (excluding bonuses) and 3.9% for total earnings (including bonuses) in November 2025 to January 2026.  This represents the slowest pace of pay growth in five years, highlighting a cooling in wage momentum at a time when household budgets remain under pressure.  With prices being pushed higher by ongoing instability in the Middle East, inflationary pressures are expected to intensify, meaning employees are increasingly likely to seek higher wages to protect their living standards, while many employers are simultaneously grappling with the same rising cost pressures across their operations.  This growing tension between wage expectations and affordability is likely to become a defining feature of 2026 pay negotiations.

The implementation of the Employment Rights Act 2025 is now fully underway, with initial reforms already in force and a further substantial set of changes scheduled for April 2026. These shifts are inevitably shaping labour‑market behaviour, contributing to a more cautious outlook as employers balance rising operating costs, reduced workforce flexibility, and an increasingly complex compliance environment.”