DWF comments on UK labour market

The headline figures show ongoing resilience in the UK labour market despite economic pressure. The UK employment rate was estimated at 75% in January to March 2025. This is above estimates of a year ago but largely unchanged on the quarter. The UK unemployment rate was estimated at 4.5%, this is above estimates of a year ago, and up in the latest quarter.

The estimated number of vacancies in the UK fell by 42,000 on the quarter, to 761,000 in February to April 2025 – the 34th consecutive decline with quarterly falls seen in 13 out of the 18 industries. We are seeing employers across the board taking a cautious approach to recruitment with the Employment Rights Bill implementing a raft of new protection for the workforce, including making unfair dismissal a day one right.

Annual growth in employees’ average regular earnings excluding bonuses in Great Britain was 5.6% in January to March 2025, and annual growth in total earnings including bonuses was 5.5%. With the hike in employer National Insurance contributions we are seeing earnings plateau as employers seek to reduce costs. However there is some movement in the market as employees change employers to seek out higher wages.

The recent fall in inflation perhaps offered the market some optimism, however, the fall is predicted to not last long and has been described as the calm before the storm. Labour intensive industries such as hospitality, retail and manufacturing are likely to face the toughest challenges in such a volatile market. It is crucial for employers to keep up with the latest employment law developments and plan accordingly – including balancing protected characteristics following the Supreme Court decision on biological sex. Fostering a positive workplace culture and employee engagement, ensuring clear communication, and maintaining transparency are essential components for employers to stay ahead of the curve.