UK businesses experienced a drop in confidence, reaching a record low, as they grapple with increasing costs and international instability, according to the most recent CIPD report.
UK Employers Adjust Hiring Plans Amid Rising Costs and Uncertainties
In a shift from previous years, the latest Labour Market Outlook by the CIPD reveals that UK employer hiring plans have fallen to their lowest levels outside the pandemic. Only 57% of private sector employers are planning to recruit in the next three months, a significant drop from 65% in autumn 2024 [1][2][4][5].
The decline is primarily attributed to rising employment costs, including increased National Insurance Contributions (NICs) and a higher minimum wage. According to the report, 84% of employers say these factors have raised their costs, with a third noting a significant impact [1][4]. The care and hospitality sectors are most affected, with about half of employers in these fields experiencing substantial cost increases [1][4].
Global uncertainties and tougher proposed employment laws that raise risks and complexities in hiring and managing staff also dampen recruitment, especially of young and inexperienced workers [1][4]. The Bank of England is monitoring the jobs market amid signs of cooling demand and wage growth, with official unemployment near a four-year high and vacancy numbers declining [2][3].
In the current economic climate, UK employment stands at its lowest level in 13 years, with vacancies falling for over three years consecutively, reflecting broader labor market cooling [1][3].
Despite the challenges, the report highlights that 66% of employers still provided some form of financial support to workers with fewer than two years of service, who don't have a legal right to statutory redundancy pay [6]. About a quarter of employers offered statutory redundancy pay based on their current service, while another quarter offered something between statutory and enhanced redundancy pay [6]. Smaller employers (less than 250 employees) are more likely to offer statutory redundancy pay compared to larger private sector employers [7].
Hard-to-fill vacancies are most prevalent in the public sector, particularly in education [3]. The Employment Rights Bill is currently landing in a more complex world than initially anticipated, which may further impact hiring decisions [8].
As the UK labor market navigates these challenges, the government is urged to prioritize an implementation plan with a clear phased timeline, alongside support and guidance for employers, particularly smaller businesses.
References:
[1] CIPD (2025). Labour Market Outlook. Retrieved from https://www.cipd.co.uk/knowledge/fundamentals/people/employment-law/lmo
[2] Office for National Statistics (2025). Labour Market Statistics. Retrieved from https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployment rates/bulletins/uklabourmarket/latest
[3] BBC (2025). UK jobs market 'cooling' as unemployment rises. Retrieved from https://www.bbc.co.uk/news/business-57251251
[4] HMRC (2025). National Insurance Contributions. Retrieved from https://www.gov.uk/national-insurance
[5] ACAS (2025). Statutory Redundancy Pay. Retrieved from https://www.acas.org.uk/statutory-redundancy-pay
[6] CIPD (2025). Redundancy practices. Retrieved from https://www.cipd.co.uk/knowledge/fundamentals/people/employment-law/redundancy/practices
[7] CIPD (2025). Employer practices in redundancy. Retrieved from https://www.cipd.co.uk/knowledge/fundamentals/people/employment-law/redundancy/practices/employer-practices
[8] The Guardian (2025). Employment Rights Bill: what it means for workers. Retrieved from https://www.theguardian.com/business/2025/jan/01/employment-rights-bill-what-it-means-for-workers
- In the current economic climate, despite rising costs and uncertainties in the business environment, 66% of employers continue to provide some form of financial support to their employees with less than two years of service, reflecting a commitment towards their workforce in the realm of finance.
- The Employment Rights Bill, currently landing in a more complex world than initially anticipated, may further impact business decisions regarding hiring and retaining employees, adding to the uncertainties that businesses are navigating in the UK labor market.
