- UK job vacancies drop to a 12-year low as businesses struggle with rising labour costs.
- Wage growth slows but remains higher than inflation, impacting spending power.
- Employer optimism plunges to its lowest since January 2021, driven by economic uncertainty.
Despite rising wages, the UK job market is facing a significant downturn as employers grapple with higher costs, including increased national insurance contributions and the minimum wage hike.
BDO’s latest report indicates a decline in business confidence, with its Optimism Index reaching its lowest level since the UK’s third national lockdown in 2021.
Labour Market Decline Deepens Amid Cost Pressures
Rising costs and economic instability are taking a toll on UK businesses, leading to a notable decrease in job vacancies and employment rates. In April, vacancies fell below pre-pandemic levels, while employer optimism hit a new low, reflecting the compounding effect of higher wage bills and regulatory pressures.
The services sector, a key driver of the UK economy, saw a sharp decline in output due to weaker international demand and trade disruptions. Meanwhile, wage growth, though still above inflation, has slowed, indicating that spending power may also be affected.
The Bank of England’s recent interest rate cuts signal concern over economic stability, with the base rate projected to drop to 3.75% by year-end. However, businesses remain wary, with 24% planning redundancies in the coming months as they brace for further cost pressures.
BDO’s report underscores the mounting challenges faced by mid-sized firms, particularly in accessing capital and managing operational costs amid rising taxes and regulatory changes. The report suggests that without targeted support, business output may continue to decline, further exacerbating the economic slowdown.
The UK job market is entering a challenging phase, with rising costs, declining confidence, and weaker output creating a turbulent economic landscape.
“Month on month we’re seeing the bleak impact of the increased tax burden, greater regulation, and global instability on UK businesses.” — Scott Knight, BDO
