The UK jobs market is showing clear signs of strain, with employers cutting annual pay awards, reducing bonuses, and slowing recruitment as the economic downturn bites.
Figures from the Office for National Statistics (ONS) reveal that unemployment remained at 4.7% in the three months to June – a four-year high – while vacancies fell sharply and bonus payments dwindled.
Pay growth including bonuses slipped from 5% to 4.6%, while regular pay (excluding bonuses) held steady at 5%. The ONS said the figures suggest companies are cutting back on incentives as well as hesitating to hire.
Vacancies dropped by 44,000 in the latest quarter, marking the **37th consecutive decline** and taking the total to just 718,000 – well below pre-pandemic levels. Many employers are reportedly not replacing staff who leave, reflecting a more cautious approach to workforce planning.
Suren Thiru, Economics Director at ICAEW, warned that April’s increase in employer National Insurance contributions continues to weigh heavily on hiring decisions. “The UK jobs market is facing more pain, with higher labour costs likely to lift unemployment moderately higher in the coming months,” he said.
The Bank of England recently cut interest rates by 0.25 percentage points to 4%, citing weakening pay growth and a softening jobs market. However, analysts believe the slowdown is unlikely to prompt another rate cut in September.
The finance and business services sector – which traditionally pays the highest bonuses – saw the weakest annual regular pay growth at just 3.1%.
Recent surveys show recruitment intentions among UK businesses are at a record low, particularly in low-paid sectors such as retail and hospitality. According to the Chartered Institute of Personnel and Development, only 57% of private sector employers plan to hire in the next three months, down from 65% in autumn 2024.
Hannah Slaughter, Senior Economist at the Resolution Foundation, said the UK’s once “red hot” post-pandemic jobs market has cooled significantly.
“We’ve shed 165,000 payrolled jobs over the past eight months, with losses concentrated in low-paying industries. This makes a significant increase to the minimum wage less likely next year,” she said.
Private sector pay rose by 4.8% in the year to June, which is a modest 0.7% increase after inflation. Public sector pay saw a stronger rise at 5.7%.
Employment Minister Alison McGovern said the government is focused on “getting people into good jobs by joining up work, health and skills support” and modernising job centres to provide more practical help.
However, Shadow Work and Pensions Secretary Helen Whately criticised the government’s record, pointing to ten consecutive months of rising unemployment since Labour took power last year.
Recruitment firm PageGroup also painted a bleak picture, reporting an 11% drop in revenue in the first half of the year and a 99% fall in pre-tax profits. Chief Executive Nicholas Kirk blamed “ongoing macroeconomic uncertainty” for slowing hiring decisions and extending recruitment timelines.
Key Takeaways for the UK Labour Market:
• Unemployment steady at 4.7%, but highest in four years
• Vacancies fall for the 37th month in a row
• Bonus payments cut, especially in finance
• Hiring slowdown hitting low-paid sectors hardest
• Economic uncertainty and higher costs dampening employer confidence
As the UK economy struggles to regain momentum, both employers and jobseekers face a tougher labour market – with fewer opportunities, lower incentives, and a cautious approach to recruitment likely to persist into 2025.
