The UK labor market has hit a five-year low in job vacancies, as official data from the Office for National Statistics (ONS) shows a marked decline in recruitment activity. During the May-to-July period, the number of available roles dropped to 707,000. The ONS noted that smaller businesses are increasingly scaling back their hiring plans, largely driven by the mounting pressure of labor and operational expenses.
Companies report that a combination of factors has made staffing significantly more expensive. These include rising energy costs following the outbreak of the Iran war, alongside recent increases in the national minimum wage and National Insurance contributions. Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, described the current climate as a “low-churn limbo.” He noted that employers are hesitant to hire, fire, or increase wages while facing global economic headwinds, policy uncertainty, and rising costs. Thiru added that the persistent decline in vacancies serves as a “red flag,” suggesting that shrinking labor demand and increased automation are squeezing entry-level opportunities.
Despite the cooling recruitment market, the ONS reported that the broader labor market remains “little changed overall,” with the unemployment rate holding steady at 4.9%. However, payroll data indicates a downward trend, with the number of employees on payroll falling by 13,000 in June, followed by an estimated further decline of 13,000 in July.
Wage growth figures present a mixed picture. Regular earnings, excluding bonuses, rose at an annual rate of 3.5% in the three months to June. Public sector pay growth reached 6.1%, bolstered by the timing of recent NHS pay awards, while private sector wage growth slowed to 2.8%—the lowest rate in nearly six years.
In response to the data, Secretary of State for Work and Pensions Pat McFadden highlighted what he called “signs of progress.” He pointed to government reforms aimed at getting Britain back to work, specifically mentioning changes to Universal Credit designed to remove employment barriers and new funding to assist individuals with disabilities or health conditions in entering the workforce.
The figures drew sharp criticism from the opposition. Shadow Chancellor Mel Stride expressed concern over the five-year low in vacancies and persistent unemployment, accusing the government of failing to prioritize work. Meanwhile, the Conservative Party proposed new measures on Tuesday intended to boost summer employment for young people. Their plan includes offering greater flexibility regarding shift patterns and break times, as well as simplifying restrictions on evening work during weekends and outside of term-time. The report also notes that vacancy numbers fell over the May-to-July period to 707,000, according to the Office for National Statistics (ONS), which said small firms were citing labour and operating costs as reasons for scaling back hiring.
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