As the UK economy adjusts to post-inflationary pressures, recent figures show that recruitment momentum is slowing while salary growth levels off. This trend is sparking debate about how employers can adapt to a more cautious labour market without losing talent.
New data released by the Office for National Statistics (ONS) confirms that permanent job placements have declined for the 29th consecutive month as of February 2025. Meanwhile, wage increases are moderating, with average earnings (excluding bonuses) rising by just 5.9% in the 12 months to January. Once adjusted for inflation, real earnings saw a modest increase of 2.2%.
This flattening of wage growth comes as employers across sectors adopt more conservative hiring approaches. “We’re seeing signs of caution in recruitment intentions, with organisations hesitant to make long-term hiring commitments,” said Jon Boys, Senior Labour Market Economist at the CIPD. The professional body attributes this caution to continuing economic uncertainty, increased employment costs, and potential shifts in government policy ahead of the next general election.
Despite these challenges, the UK labour market remains tight. The employment rate stands at 75%, with unemployment at 4.4%. Economic inactivity has dropped slightly to 21.5%, suggesting some re-engagement with the workforce. Still, while candidate availability has improved, recruitment firms report concerns about the skills and readiness of applicants—especially for technical and specialist roles.
This has serious implications for inclusion and social mobility. According to diversity advocates, underrepresented communities often face the steepest barriers to accessing roles in growth sectors like tech, health, and engineering. A slow-down in hiring could widen these inequalities if not addressed with targeted outreach, training, and support.
The effects are especially noticeable in industries that rely heavily on lower-wage or part-time workers. Retail, hospitality and social care sectors are feeling the pressure of rising costs and struggling to retain staff. While many businesses are keen to offer better pay, limited budgets and rising operational costs constrain their ability to compete.
“Employers must be proactive about reskilling and career progression, especially for roles traditionally occupied by women, ethnic minorities and disabled workers,” said a spokesperson from the Social Mobility Foundation. “This is a moment to build fairness into recovery.”
Strategists suggest that forward-looking employers invest in workforce development and internal mobility, rather than scaling back entirely. Many are exploring automation and digital tools, but experts warn that technology alone won’t solve the structural issues within the UK labour market.
With local and regional variations also playing a part, policymakers are being urged to support workforce investment through training subsidies, local employment initiatives, and inclusive hiring campaigns. While national averages provide insight, many towns and cities face specific skills challenges that require tailored solutions.
For candidates, flexibility, adaptability, and digital literacy are becoming increasingly valuable. Career advisors are recommending that jobseekers remain open to temporary or hybrid roles while continuing to develop transferable skills.
The coming months will be crucial in determining whether the current hiring slowdown stabilises or continues. Either way, addressing disparities in opportunity and fostering resilience through inclusive employment practices will be key to strengthening the UK’s economic recovery.
2. Employers Grapple with Cost Pressures as Redundancies Rise
A surge in redundancy intentions has raised red flags about the state of employer confidence in early 2025, with experts pointing to economic pressures that are squeezing workforce stability across the UK.
New data from the Chartered Institute of Personnel and Development (CIPD) reveals that a quarter of UK employers are planning redundancies between January and March 2025—up from 21% in the previous quarter and the highest figure recorded outside of the pandemic.
This increase is being driven by several factors, most notably rising labour costs. The National Living Wage is set to rise to £12.21 in April, while changes to National Insurance contributions are expected to further increase employer overheads. According to the CIPD’s Labour Market Outlook, 90% of businesses expect their employment costs to rise this year, and nearly half (43%) predict a significant impact.
“Employers are having to make difficult decisions in the face of cost increases,” said Jon Boys, Senior Labour Market Economist at the CIPD. “For some, this means reviewing workforce size and structure, which explains the rise in redundancy intentions.”
Organisations in lower-margin sectors such as retail, hospitality, and logistics are particularly exposed. Many report scaling back recruitment plans, with only 39% of employers planning to grow their workforce this quarter—down sharply from 48% six months ago.
At the same time, there are signs that some employers are pausing or reducing investment in training and development. The CIPD notes that 19% of employers have already taken steps to cut training budgets, a move that could limit career development opportunities and impact retention.
Diversity and inclusion advocates warn that redundancy plans must be handled with fairness and accountability. “Marginalised groups are often first to feel the impact of job cuts,” said a spokesperson from the Diversity and Inclusion Research Centre. “We encourage employers to use inclusive decision-making frameworks and to offer redeployment options where possible.”
The CIPD is calling for government action to support employers, including targeted tax incentives for workforce development and greater inves