The UK job market is slowing down, with fewer vacancies and a slight drop in payroll numbers, according to the latest figures from the Office for National Statistics (ONS). While the decline isn’t as steep as some predicted, rising business costs and changes to wages and taxes are shaping hiring decisions across industries.
The UK’s employment scene is continuing to cool, with the latest ONS data showing a 5.8% drop in job vacancies — down to 718,000 between May and July. Openings fell across almost every sector, marking the lowest vacancy level since early 2021, when the country was still recovering from the Covid pandemic. Outside of that period, such low numbers haven’t been seen since early 2015.
The ONS noted that some businesses appear hesitant to hire or replace departing staff. Despite this slowdown, average wage growth held steady at 5%, and the unemployment rate stayed unchanged at 4.7%. Payroll figures slipped by 8,000 between June and July, a sign of what former Bank of England policymaker Andrew Sentence described as a “very gradual cooling.”
Currently, over 30 million people remain on UK payrolls. However, the ONS cautioned that payroll data may not be entirely reliable and is working to improve accuracy.
Ashley Webb, UK economist for Capital Economics, suggested that the modest payroll decline may indicate the jobs market is stabilising after April’s increases in the National Living Wage and employer National Insurance contributions. The minimum wage rose from £11.44 to £12.21, while employer NI contributions increased from 13.5% to 15%, with the salary threshold dropping from £9,100 to £5,000.
Liz McKeown, ONS director of economic statistics, highlighted that payroll declines over the past year have been most notable in hospitality and retail — industries also seeing fewer job openings. Still, redundancies remained “relatively subdued” in July.
Reactions to the figures have been mixed. Chancellor Rachel Reeves said the data contained “some really positive news” but acknowledged there was more work to be done to bring down the unemployment rate, now at a four-year high. Opposition politicians, like Shadow Work and Pensions Secretary Helen Whately, blamed Labour’s economic policies, claiming high taxes and increased regulation are harming businesses.
On the ground, hospitality businesses are feeling the pressure. Louise Maclean, of Scottish hospitality group Signature Group, said higher employment costs since April have made profitability “just so hard” and are influencing hiring choices. The company is now prioritising experienced staff over younger, inexperienced workers.
Education Minister Baroness Jacqui Smith defended the government’s tax decisions, claiming employer contributions have helped stabilise the economy. Economists, however, warn that the fall in vacancies could slow wage growth — a factor the Bank of England monitors closely when adjusting interest rates.
The Bank’s inflation target is 2%, but rising food and energy costs have pushed inflation higher in recent months. Monica George Michail, from the National Institute of Economic and Social Research, expects the Bank to cut interest rates again in November, lowering them from 4% to 3.75%.
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