LONDON The UK labour market is beginning to lose momentum, with new data showing a slowdown in worker demand in the months leading up to April’s National Insurance hikes and minimum wage increases. The figures signal growing employer caution amid rising labour costs and economic uncertainty.
According to the Office for National Statistics (ONS), job vacancies have declined for the fourth consecutive month, with the sharpest drops seen in hospitality, retail, and administrative services. Recruitment agencies are also reporting reduced hiring activity, particularly among small and medium-sized enterprises.
“There’s a clear softening in the market,” said Julia Martin, senior economist at the British Chambers of Commerce. “Many firms are in wait-and-see mode due to cost pressures and policy uncertainty.”
Despite the fall in demand, average wage growth remains strong, rising at 5.6% year-on-year. Analysts say this reflects both lagging wage agreements and continued competition for skilled workers in high-demand sectors such as healthcare, IT, and logistics.
“This is a mixed picture,” noted Dr. Anand Patel of the Institute for Employment Studies. “On one hand, employers are pulling back; on the other, wages are holding firm, indicating a still-tight market for qualified staff.”
The April policy changes increased minimum wages and higher National Insurance contributions for employers are believed to be contributing to the shift, with some businesses delaying hiring or reducing hours to manage rising payroll expenses.
Meanwhile, unemployment remains relatively stable at 4.2%, though analysts warn this figure could rise if the hiring slowdown persists into the summer.
Chancellor Rachel Reeves has acknowledged the labour market’s “delicate balance” and emphasized the government’s support for upskilling and apprenticeships. However, opposition parties have criticised the timing of the tax changes, calling them “a blow to struggling businesses.”
With broader economic indicators also pointing to sluggish growth, the evolving labour market will remain a key pressure point for policymakers in the months ahead.
