UK employers are showing a significant drop in confidence amid rising costs and global uncertainty, with hiring intentions falling to their lowest point outside the COVID pandemic, according to the latest Labour Market Outlook report from the CIPD.
The report noted growing concern across sectors, especially retail and education, as businesses respond to rising employment costs and global instability.
The survey reveals that the net employment balance – the difference between employers expecting to increase versus decrease staff numbers over the next three months – has dropped from +13 last quarter to +8. This is the lowest level recorded outside of the pandemic since the measure was introduced in 2014.
The report also shows that confidence has slipped into negative territory within the public sector, where the net employment balance moved from +3 to -4. In the private sector, it declined from +16 to +11. The retail sector has been particularly affected, with a drop from +23 in Autumn 2024 to -19 this quarter. Only 10 percent of retail employers now expect staffing increases, while 30 percent expect reductions.
The education sector is also under pressure. In compulsory education, the net balance is now -13, and in non-compulsory education – including vocational and higher education – it has fallen to -7. Overall, 61 percent of employers plan to recruit in the coming three months, a decline from 64 percent in the previous quarter and 67 percent in Autumn 2024.
Hiring intentions weakest among big private sector employers
The fall in expected staff increases is most pronounced among large private sector employers. Last quarter, 39 percent of employers in the private sector expected staffing levels to rise. This has now dropped to 32 percent. The CIPD reports that one in four employers (24%) are planning redundancies over the next three months, consistent with the previous quarter but above the 21 percent recorded last Autumn.
The CIPD is urging the government to consult employers and develop a clear implementation plan for the Employment Rights Bill, warning that uncertainty around the legislation may be compounding existing pressures on recruitment and investment.
James Cockett, senior labour market economist at the CIPD, said, “From April, employers across the UK have begun to feel the full effect of increases to National Insurance Contributions and the National Living Wage outlined in last year’s budget. They’re also looking at the potential impact of the Employment Rights Bill on employments costs and plans, and this comes at a time of global uncertainty. Employer confidence is low which is being reflected in their hiring plans.”
He added that the Employment Rights Bill is landing in “a fundamentally different landscape” to the one expected when it was fist conceived as part of the Labour manifesto.
“It was always going to be a huge change for employers but they’re operating in an even more complex world now,” Cockett said. “It’s vital the government works closely with employers to balance the very real risk of reductions in investment in people, training and technology with their desire to reduce poor employment practice. The government can address employer nerves around the bill by prioritising an implementation plan with a clear phased timeline, alongside support and guidance for employers, and smaller businesses in particular.”
Redundancy practices and pay trends under scrutiny
The report also explored redundancy decisions made by employers in the past year. It found that 27 percent of employers had carried out a redundancy programme in the previous 12 months. Among those, half offered enhanced redundancy packages, while 41 percent provided only the statutory minimum. Nine percent were unsure what had been offered.
There is a clear difference in redundancy pay practices between larger and smaller employers. While 54 percent of small employers (with fewer than 250 employees) provided statutory redundancy pay, only 37 percent of larger private sector firms did so.
Statutory redundancy pay is not required for workers with under two years of service. However, the report notes that 66 percent of employers still chose to provide some form of financial support to these employees. Around 25 percent offered the statutory rate and a further 23 percent gave an amount between statutory and enhanced pay.
