UK Labour Market Reaches Lowest Point, Indicating an Uphill Battle Ahead
The UK's hiring outlook for the third quarter of 2025 has taken a downturn, according to the ManpowerGroup Employment Outlook Survey, with a forecasted figure of +19%. This decline, representing a 12% drop from the previous quarter, is attributed to a combination of economic uncertainty, rising employment costs, trade tensions, and subdued labour market dynamics.
The decline affects various sectors, with some industries like communications services and energy & utilities even planning to reduce headcount for the first time since 2021, indicating a wider malaise. Market volatility and economic uncertainty have significantly dampened employer confidence, leading to a "reset" in the employment market due to recent policy changes such as increases in National Insurance and the Living Wage.
External economic pressures, such as uncertainty surrounding US trade tariffs, have also contributed to the cautious stance employers are taking. Companies are adopting a "wait and see" approach before deciding on workforce expansions toward the end of the year.
Falling worker confidence is another factor impacting business growth prospects. A significant proportion of UK senior managers fear job losses, and concerns about automation replacing roles further undermine the employment environment. This employee anxiety coincides with employers' reduced hiring intent.
Despite the gloomy picture, there are sectors showing positive hiring intent. The sectors with the most positive outlook include IT, Industrials and Materials, Financials & Real Estate, and Healthcare and Life Sciences. However, 64% of employers cite economic challenges as the top barrier to recruitment, almost double Q2.
Employers are also reducing staff to match current demand (59%), with 18% citing changes in required skills as a reason for reduced hiring. The drop in hiring confidence is considered a 'reset' rather than a trend, and history shows resilience, with post-COVID demand eventually bouncing back.
As the economy stabilises, we could see hiring pick up again by year-end. There is also positive hiring intent for employers in Consumer Goods & Services and Transport, Logistics & Automotive. However, 54% of jobs tied to finished projects are no longer needed, and economic challenges are negatively affecting staffing (36%).
In summary, the UK's hiring outlook for Q3 2025 is shaped by a complex interplay of factors, with employers showing caution due to broader macroeconomic headwinds and labour market realignments rather than sector-specific issues alone.
Businesses are adopting a cautious approach toward workforce expansions due to economic uncertainty and rising employment costs, with many planning to reduce headcount in certain sectors like communications services and energy & utilities. In contrast, sectors such as IT, Financials & Real Estate, and Healthcare and Life Sciences continue to show positive hiring intent, despite 64% of employers citing economic challenges as the top barrier to recruitment.
