UK businesses are cutting back on hiring plans amid a surge in labour costs and growing economic uncertainty, with employment confidence falling to its lowest level in over a decade outside of the pandemic, new research reveals.
According to the Chartered Institute of Personnel and Development (CIPD), the net hiring outlook — the difference between employers expecting to increase staffing and those anticipating cuts — has fallen to just 8, the weakest since 2014 excluding pandemic years. The figure stood at 13 last quarter.
The slowdown is most evident among large private-sector companies and retailers, though public-sector hiring — particularly in education — is also under strain. Just 32 per cent of private-sector firms said they expected to add staff over the next three months, while 24 per cent of all employers surveyed said they were planning redundancies.
Separate figures from KPMG and the Recruitment and Employment Confederation (REC) paint a similarly downbeat picture. Their latest labour market report for April shows declining demand for both permanent and temporary staff, alongside a rising number of jobseekers. Recruitment agencies reported an uptick in candidate supply, driven by restructuring, redundancies, and an overall drop in new hiring.
The south of England recorded the sharpest drop in permanent placements, while London fared slightly better with the softest decline. Engineering was the only sector to see an increase in demand for permanent staff. In contrast, vacancies fell sharply in nursing, retail, and hospitality — with temporary staff demand down across all ten tracked industries.
While minimum and living wage rises in April pushed up starting salaries — particularly for temporary roles, which saw their fastest pay increase in nearly a year — overall pay growth remains below historical averages.
Neil Carberry, chief executive of the REC, said: “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.”
However, broader signals remain worrying. Accountancy firm BDO reports that employment confidence has reached a 12-year low, with a combination of wage pressures, higher National Insurance contributions, and global instability — particularly driven by President Trump’s tariff measures — denting business sentiment.
Vacancies fell below pre-pandemic levels for the first time in four years, and payroll estimates show a drop of 78,000 employees in March alone. BDO’s “optimism index”, tracking confidence across key sectors like manufacturing and services, fell to 91.36 in April — its lowest since January 2021, during the UK’s third national lockdown.
Business output has also stalled. BDO’s output index dropped from 98.23 to 96.9, its sharpest monthly fall since October 2023 when the Middle East conflict disrupted global markets.
Taken together, the data signals a cooling labour market and subdued business outlook, with rising operating costs and geopolitical pressures weighing heavily on UK firms’ plans for the months ahead.
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Employers slash hiring plans as wage costs rise and economic uncertainty deepens