Britain’s jobs market is showing fresh signs of strain, with businesses cutting staff at the fastest pace this year as global instability weighs on confidence and hiring.
New figures from the Recruitment and Employment Confederation and KPMG reveal a sharp rise in job seekers in March, driven by mounting redundancies and a slowdown in recruitment.
High street sectors have been hit hardest. Retailers and hospitality firms are facing a squeeze from rising labour costs and weaker consumer spending, forcing many to scale back hiring or cut roles altogether.
While the index for permanent placements showed a marginal improvement in February, it still points to an overall contraction in opportunities. Vacancies have fallen across both public and private sectors, and demand for temporary workers continues to decline.
The deterioration comes as the Organisation for Economic Co-operation and Development warned that the UK is set to be among the hardest-hit major economies by the fallout from tensions in the Middle East.
Growth is now forecast at just 0.7 per cent this year, down from 1.2 per cent previously, with inflation expected to remain higher for longer.
The OECD said prolonged disruption could trigger global energy shortages, pointing to surging wholesale oil and gas prices and strain on key shipping routes such as the Strait of Hormuz.
Higher energy costs are also feeding through to agriculture, with rising fertiliser prices expected to push food inflation higher next year.
Official data from the Office for National Statistics shows unemployment has climbed to 5.2 per cent in the three months to January — the highest level in five years.
Young people are bearing the brunt of the downturn. Unemployment among 18 to 24-year-olds has risen to 14.5 per cent, its highest level in nearly a decade.
Job vacancies have also fallen, dropping by 6,000 to 721,000 in the three months to February, reflecting weaker demand across the economy.
Pay growth is also losing momentum. Starting salaries are rising at their slowest pace in five months, while overall wage increases have slipped to their lowest level in more than five years.
Although earnings are still outpacing inflation, the gap is narrowing — a development being closely watched by the Bank of England.
Policymakers had been expected to begin cutting interest rates from 3.75 per cent, but rising energy costs and renewed inflationary pressure have complicated that outlook.
Economists warn that persistently high energy prices could delay rate cuts and prolong the squeeze on households and businesses.
Thomas Pugh, chief economist at RSM, said the labour market was already fragile before the latest geopolitical shock.
“That weakness will temper the likely hawkish shift from the Monetary Policy Committee and is the key reason we expect a prolonged hold if energy prices stay high,” he said.
Neil Carberry, chief executive of the Recruitment and Employment Confederation, said the Gulf conflict had acted as a headwind to hiring but insisted the broader trend in 2026 had been one of tentative stabilisation.
For now, much depends on confidence.
Businesses and households are sitting on cash reserves, and any improvement in conditions could unlock spending. But with growth slowing, inflation proving stubborn and hiring faltering, the outlook remains finely balanced.
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