Britain’s fragile jobs market has shown fresh signs of strain as small businesses cut back on recruitment amid rising costs, higher wages and growing economic uncertainty.
Official figures from the Office for National Statistics revealed that vacancies fell by another 7,000 in the three months to June, dropping to 712,000 — the lowest level in years as employers become increasingly reluctant to expand their workforces.
The decline was driven largely by smaller companies, which cut vacancies by 8,000 as firms struggled with mounting labour and operating costs.
The figures underline the pressure facing Britain’s business community, where weaker demand, tax increases and higher employment costs have forced many employers to pause hiring plans.
Private sector wage growth also weakened, falling below 3 per cent for the first time since 2020. Regular private sector pay growth slowed to 2.9 per cent in the three months to May, down from an upwardly revised 3 per cent previously.
Although unemployment remained unchanged at 4.9 per cent, the underlying picture suggests a labour market losing momentum rather than one enjoying a strong recovery.
The number of workers on company payrolls fell by 4,000 between May and June, leaving total payroll employment at 30.3 million.
Public sector pay growth continued to distort the wider figures, rising 5.5 per cent due to the timing of NHS pay awards. Overall regular earnings growth remained at 3.4 per cent, still slightly ahead of inflation.
Economists warned, however, that the apparent stabilisation may prove temporary.
Matt Swannell, chief economic adviser at the Item Club, said there were signs the labour market downturn may have reached its lowest point, but warned renewed energy price shocks could quickly reverse progress.
“With a sustained reduction in the use of the Strait of Hormuz looking increasingly likely, we expect high energy prices to weigh on growth and the jobs market,” he said.
The data will be closely watched by the Bank of England ahead of its next interest rate decision, with policymakers assessing whether slowing wage growth gives them room to cut borrowing costs.
Thomas Pugh, chief economist at RSM UK, said the weaker labour market could help ease inflation pressures, arguing that a “stale labour market” gave the Monetary Policy Committee flexibility.
But for Britain’s smallest businesses, the message is stark: the hiring boom is over, and rising costs are forcing employers to think twice before taking on new staff.
The figures offer a warning to the incoming government that growth will depend not just on headline investment promises, but on whether ordinary firms feel confident enough to create jobs again.
Leave a Comment