UK job vacancies have fallen to their lowest level in five years as unemployment edged higher and payroll numbers continued to decline, adding to concerns over weakening demand for workers.
The latest labour market figures suggest employers are becoming increasingly cautious on hiring as rising costs, economic uncertainty and conflict in the Middle East weigh on business confidence.
The data also showed pay growth continuing to slow, with regular earnings only narrowly ahead of inflation.
Figures published by the Office for National Statistics (ONS) on Tuesday showed vacancies fell by 28,000 between February and April to 705,000, the lowest level since early 2021.
Hiring demand weakens across sectors
The unemployment rate rose to 5 percent in the three months to March, compared with 4.9 percent previously. Meanwhile, early estimates suggested the number of payrolled employees fell by 100,000 in April alone.
The ONS cautioned that April payroll estimates were provisional and often revised upwards because early tax-year figures carry greater uncertainty. Liz McKeown, director of economic statistics at the ONS, said some sectors were facing particularly sharp declines in hiring demand.
“Lower-paying sectors such as hospitality and retail have seen some of the largest falls in vacancies and payroll numbers, both in recent months and over the last year,” she was quoted by the BBC as saying.
The figures also showed average regular earnings growth slowed to 3.4 percent in the first quarter of the year. After inflation was taken into account, regular pay growth stood at just 0.3 percent. Public sector regular pay growth remained stronger at 4.8 percent compared with 3 percent in the private sector.
Middle East conflict adds pressure
Economists said the figures were beginning to reflect the early economic effects of conflict in the Middle East and rising energy costs.
Richard Carter, head of fixed interest research at investment firm Quilter Cheviot, said the weakening labour market could continue if business costs remained elevated.
“Today’s figures only capture the initial effects of the conflict, and the full impact will become more apparent in the coming months as higher costs and the potential for weaker consumer demand begin to filter through,” he said.
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said the latest figures pointed to growing strain across the labour market.
“The continued fall in job vacancies is a worrying sign of the strength of the labour market as it suggests that demand for staff is deteriorating quickly amid global headwinds and the growing financial squeeze on firms,” he said.
The latest ONS figures showed vacancies had now fallen for several consecutive quarters after remaining broadly flat through much of 2025.
James Cockett, senior labour market economist at the Chartered Institute of Personnel and Development, the professional body for HR and people development, said employers were becoming increasingly cautious as costs and geopolitical uncertainty mounted.
“As expected, unemployment has risen this month, as employers continue to grapple with rising costs. Expectations are that unemployment could rise to five and a half percent by the end of the year, potentially hitting the two million mark,” he told HRreview.
He said uncertainty surrounding the Middle East conflict was likely adding to employer caution on recruitment and investment decisions.
“The latest ONS data covers the first quarter of the year, but continuing uncertainty in the Middle East can only have added to employer’s reluctance to hire, on top of rising employment costs seen over the past year or more,” he said.
Cockett said smaller businesses were being hit particularly hard by the slowdown in vacancies.
“The fall in vacancies in the last year is almost entirely driven by falling vacancies among SMEs, the backbone of the UK economy,” he said.
He warned the government needed to ensure Employment Rights Act reforms did not further weaken hiring confidence.
“It also needs to consult meaningfully and potentially compromise on key measures in the Employment Rights Act still to be finalised in secondary legislation to ensure they don’t further undermine employment and growth,” he said.
Recruitment pressures easing
The decline in vacancies is likely to ease some of the recruitment difficulties employers experienced during the post-pandemic labour shortages. But weaker hiring demand may also intensify concerns around slowing economic growth and rising financial pressure on households.
The labour market has come under growing pressure in recent months following increases in employer National Insurance contributions and the National Minimum Wage alongside rising energy and supplier costs.
Business groups have also warned that uncertainty surrounding the Employment Rights Act reforms could further dampen hiring appetite. Despite the slowdown, the employment rate for people aged 16 to 64 remained broadly stable at 75 percent.
Economic inactivity stood at 20.9 percent during the quarter.
The ONS said caution should still be used when interpreting short-term labour market movements because of continuing improvements to Labour Force Survey data collection and methodology.
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
