UK employment remained subdued in June with the labour market continuing to stagnate despite some signs of recovery in business output as firms grapple with rising costs and a cautious economic outlook.
That’s according to accountancy and business advisory firm BDO’s latest Business Trends report, which found that the Employment Index slipped again in June to 94.22 down from 94.32 in May – leaving it near its lowest level since 2011. While the services sector offered some positive signals, job creation remained weak as businesses reacted to increasing cost pressures, particularly the rise in National Insurance Contributions (NICs) introduced in April.
Optimism “well below” long-term averages
Labour demand softened further, with payrolled employment figures showing a fall of 109,000 in May, nearly double the decline reported in April. This suggests a possible acceleration in job losses, as many firms continue to delay recruitment plans in response to squeezed margins.
The Optimism Index dropped to 91.58 from 92.30 in the previous month. Companies face ongoing pressure from rising costs, with the prospect of further tax increases in the Autumn dampening sentiment. Although recent trade agreements with the US, EU and India provided a slight boost to manufacturing confidence, the sector remains unstable and exposed to multiple challenges.
Scott Knight, Head of Growth at BDO, said there were signs of resilience in some areas of the economy. “We’re seeing early signs of recovery in business output, largely down to the services sector who have buoyed the economy for a second month in a row,” he commented.
Changing job market expectations amid slower hiring
Tom Jewell, VP of Customer at Zinc, pointed to significant changes in recruitment strategies driven by changing business needs and the rise of generative AI tools. He warned that the current slowdown in hiring is reshaping what employers look for in candidates.
“If organisations are going to scale back new hires while still maintaining productivity, especially in light of GenAI adoption, they’ll need to rethink what they value in candidates,” Jewell said. “With AI automating most administrative tasks, many roles are disappearing or shifting dramatically. That means job criteria must evolve. People-first capabilities, adaptability, critical thinking and problem-solving will matter more than ever.”
Jewell added that the drop in recruitment is not solely about fewer vacancies but also reflects tougher competition and changing expectations from employers. He noted an increasing reliance on AI tools by job seekers, particularly for writing applications and CVs, which raises additional concerns about the risk of mismatches in hiring.
“This sharp contraction in recruitment isn’t just about fewer jobs, it’s also about tougher competition and evolving expectations,” he said. “We’re seeing candidates increasingly rely on AI tools to help write applications, cover letters and CVs. And while this can help level the playing field, it also raises the risk of mismatched hires – new starters landing roles they’re not ready to deliver on.”
