The UK labour market is showing fresh signs of strain as companies scale back hiring and hesitate to replace departing staff, official figures released Tuesday reveal.
According to the Office for National Statistics (ONS), job vacancies across the UK fell by 63,000 in the three months from March to May, bringing the total number of available positions down to 736,000. The drop is the latest indication that businesses are becoming more cautious amid rising employment costs and economic uncertainty.
“There continues to be a weakening in the labour market,” said Liz McKeown, director of economic statistics at the ONS. She noted a noticeable decline in payroll numbers and pointed to feedback from businesses suggesting that many are pausing recruitment or not filling roles when workers leave.
The unemployment rate also rose slightly, climbing from 4.5% to 4.6% — the highest level in nearly four years. Analysts warn the rate could increase further in the coming months.
“It is likely that businesses will look to offset some of the rise in employment costs through a combination of reducing headcount and slowing hiring activity,” said Yael Selfin, chief economist at KPMG UK. “Given this, we expect the unemployment rate to edge higher over the coming year.”
The slowdown comes against the backdrop of recent policy changes. In April, National Insurance Contributions for employers increased and a higher minimum wage came into effect — measures introduced in Chancellor Rachel Reeves’ Budget last October. The changes are expected to generate £25 billion in revenue by the end of the current parliament.
While the number of people in work remains strong — up by 500,000 since Labour took office last July, according to Employment Minister Alison McGovern — the rise in unemployment has triggered political criticism.
Conservative shadow business secretary Andrew Griffith said the increase was “disappointing but no surprise,” blaming the government’s “£25bn jobs tax.” Liberal Democrat Treasury spokesperson Daisy Cooper echoed the sentiment, describing the tax as “crushing the growth potential of our high streets and small businesses.”
Average wage growth also slowed, rising 5.2% between February and April compared to 5.6% in the previous period. Despite the deceleration, wages are still growing faster than inflation, which stood at 3.5% in April.
The drop in wage growth could influence monetary policy. Bank of England Governor Andrew Bailey said last week that slowing pay increases support the case for potential interest rate cuts later this year, though no change is expected at the Bank’s next meeting on June 19.
Chancellor Reeves is set to announce the government’s Spending Review on Wednesday, outlining funding for key public services such as the NHS, education, and defence — all of which are likely to receive a larger share of resources amid an increasingly tight fiscal environment.
