Employers across the UK are scaling back hiring plans as rising labour costs and economic volatility take their toll, with new data showing workforce expansion expectations at their weakest level in a decade outside the pandemic.
The latest Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) reveals that the net employment intention — the difference between employers planning to hire and those expecting to cut jobs — has dropped to just 8. That’s down from 13 in the previous quarter and the lowest figure recorded since the CIPD began tracking the measure in 2014, excluding the exceptional lows of the Covid-19 crisis.
The drop in hiring optimism is particularly stark among large private-sector employers and retailers. Public-sector hiring remains sluggish too, especially in the education sector. Only 32 per cent of private-sector employers surveyed said they planned to increase staff over the next three months, while nearly a quarter (24 per cent) said they were preparing for redundancies.
A parallel report from KPMG and the Recruitment and Employment Confederation (REC) reinforces the picture of a cooling labour market. April saw a continued decline in demand for both permanent and temporary staff, while the number of jobseekers rose sharply due to restructuring and layoffs.
The south of England experienced the most pronounced drop in permanent appointments, with London recording the smallest decline. Engineering was the only sector to buck the trend, while vacancies fell steeply in nursing, retail, and hospitality. Temporary roles were down across all ten tracked sectors, led by retail.
While starting salaries increased — thanks to the April rise in national minimum and living wages — overall pay growth remains below historical averages. Temporary pay rose at its fastest pace in nearly a year, although wage inflation remains modest compared to longer-term norms.
Neil Carberry, chief executive of the REC, described the findings as mixed but not entirely unexpected. “Given the bow wave of costs firms faced in April, maintaining the gradual improvement in numbers we have seen over the past few months is on the good end of our expectations,” he said.
However, business sentiment has taken a deeper hit. According to new research from accountancy firm BDO, UK employment has slumped to a 12-year low, fuelled by the dual impact of higher wages and increased national insurance contributions. Vacancies have now fallen below pre-pandemic levels for the first time in four years, and HMRC estimates indicate a loss of 78,000 payroll employees in March alone.
Global factors are also weighing heavily on business confidence. BDO’s optimism index — which gauges sentiment across the UK’s manufacturing and services sectors — dropped to 91.36 in April, the lowest level since the third national lockdown in January 2021.
Business output has also stalled. The firm’s output index fell from 98.23 to 96.9 in April, marking the sharpest decline since October 2023, when tensions in the Middle East intensified.
Analysts warn that if labour market activity continues to cool, government and industry may need to re-evaluate the balance between wage policy, inflation control, and business competitiveness. For now, the outlook for UK hiring remains uncertain, with employers cautious amid mounting cost pressures and an increasingly fragile global economic backdrop.
