Rising recruitment and employment costs are prompting businesses to favour experienced candidates over younger workers, with 44 percent of employers reporting pressure to prioritise recruits who require less training, the Confederation of British Industry (CBI) has found.
Hiring confidence has also deteriorated, with just 15 percent of businesses confident about recruitment, compared with 24 percent in 2025. Meanwhile, 45 percent say they lack sufficient demand to justify creating additional entry-level positions.
It raises concerns about opportunities for young people entering the labour market, particularly as employers face higher wage bills, subdued demand and uncertainty over employment regulation.
Recruitment costs restrict opportunities for young workers
The CBI and recruitment company Pertemps published the figures in their Employment Trends Survey 2026, released this week. The survey found that 73 percent of businesses regarded rising labour costs as a threat to the competitiveness of the UK labour market, while 72 percent identified employment regulation as a concern.
The pressures are influencing recruitment decisions, with employers increasingly concerned about the expense of bringing inexperienced workers into their organisations. More than a third of businesses, 35 percent, said cost pressures were squeezing training budgets and encouraging them to recruit people who would not require additional training for entry-level positions.
The findings come ahead of the final recommendations from the Milburn Review, which is examining barriers to employment and opportunities for young people.
CBI chief executive Rain Newton-Smith said rising costs were affecting businesses’ ability to recruit and invest.
“Higher employment costs and growing regulatory pressures are making firms more cautious about hiring and investment. That matters not just for businesses, but for living standards and particularly for young people trying to get their first foot on the career ladder.”
She called on the government to use the forthcoming Budget to provide greater certainty about employment costs and work with businesses to make job creation more affordable.
Apprenticeships and workforce training under pressure
The survey also identified constraints on apprenticeship provision, with 53 percent of employers saying wider cost pressures meant they were offering fewer opportunities than they would like. Half of businesses said reducing the regulatory burden associated with apprenticeships would help the system work better for their organisation.
The concerns extend beyond new recruits, as tighter training budgets may also restrict opportunities for existing employees to develop skills and progress into more senior roles.
Carmen Watson, chairperson of Pertemps, said businesses continued to want to invest in their workforces but were becoming more cautious about recruitment, pay and training.
“When employers have less confidence and less headroom to recruit, opportunities narrow, pay progression becomes more difficult and investment in skills and training can suffer.”
She added that firms “want to invest in their people and build the skills they need for the future, but confidence remains fragile. Creating the right balance between employment costs, regulation and practical support will be essential to giving employers the confidence and headroom to recruit, invest in skills and create meaningful, sustainable employment for people at every stage of their working lives”.
Higher wage costs could affect pay and staffing
The survey found that employers were considering changes to staffing, prices and investment in response to further increases in employment costs.
Asked about an estimated 3.7 percent increase in the National Living Wage to £13.18 in 2027, 39 percent of businesses expected to offset the additional costs by raising prices. Another 29 percent anticipated reducing employment, while 22 percent expected to cut business investment. The £13.18 figure was used as a scenario in the survey rather than representing a confirmed statutory wage rate.
The outlook for pay increases has also weakened. Only 47 percent of businesses expected to raise pay rates in line with or above inflation at their next review, compared with 70 percent in 2024.
Employers’ National Insurance contributions were identified as the biggest immediate employment cost pressure. The survey also found that businesses were increasingly concerned about the UK’s attractiveness as a place to invest. Just 1.7 percent believed the labour market had become more attractive over the previous five years, while 65.3 percent considered it much less attractive.
Nearly four in five businesses, 79 percent, expected the position to deteriorate further without measures to improve competitiveness.
Employment reforms add to employer concerns
The government’s Make Work Pay programme was another source of uncertainty, with around four in five businesses reporting that the reforms would be unaffordable without adverse effects on growth, investment, employment or other employee benefits.
The responses reflect employers’ assessments of the potential costs rather than confirmed economic effects of the legislation.
Matthew Percival, the CBI’s future of work and skills director, said businesses supported fair employment standards but remained concerned about the financial and administrative demands of the reforms.
“Businesses support ensuring that work is fair, but the Employment Rights Act and wider Make Work Pay reforms are adding cost and complexity at a time when businesses can least afford it.
“Some of the most important details of these new rules are yet to be decided and getting this right is a chance to start building the confidence that businesses need to hire and invest.”
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. 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
