2025 UK Jobs & Hiring Trends Report: Labour Market Analysis

The UK economy has had its ups and downs in 2024, but as we head into 2025, there are some concerns about the labor market. While the economy fared better than expected, it has slowed down recently. One of the main reasons for this slowdown is the changes in government policies outlined in the Budget. These changes, such as increased employer National Insurance contributions and higher minimum wages, have made it more challenging for businesses to hire new employees.

Job postings have decreased across various sectors, and employers seem to have more bargaining power with a decrease in signing bonuses and an increase in zero-hours contracts. Despite this, wages have remained strong, especially for lower-paid and in-person roles, but are expected to decrease slightly next year.

Interestingly, while remote work options have decreased somewhat from their peak during the pandemic, they are still more prevalent than before the pandemic. Additionally, GenAI tools, although not widely adopted yet, are starting to gain traction in some sectors.

Looking ahead, GDP projections for the UK have been revised upward for this year and the next. Although growth is predicted to accelerate in 2025, it may not necessarily translate into increased hiring. Sectors that employ lower-paid workers, like retail and hospitality, are likely to be most affected by the policy changes outlined in the Budget.

There are challenges in accurately assessing the state of the UK labor market due to data quality issues. While the unemployment rate has increased slightly, reaching towards pre-pandemic levels remains a challenge. The government is focused on increasing labor force participation to drive economic growth. Despite a slowdown in job vacancies, the labor market remains relatively tight compared to the past two decades, although the impact of the Budget on workforce plans remains uncertain. If redundancies increase beyond the current range, the unemployment rate could rise, negatively affecting economic growth next year.