The UK job market is continuing to loosen as unemployment rises, vacancies fall again, and wage growth slows. However, pay rises are still outpacing inflation, and employment costs pressure is continuing to erode firms’ operating margins.
This is according to new data from the British Chamber of Commerce, which shows steep increases in national insurance and the national living wage loom large. The group’s research shows that recruitment remains challenging, and businesses cite labour costs as the biggest pressure.
“Firms will also be wary of plans announced this week for a review of pension auto-enrolment contributions which could lead to further cost burdens. This mounting financial pressure, alongside pervasive skills shortages, remains a massive challenge for business, presenting big risks to investment and productivity,” it said.
“The £5 billion cost associated with the employment rights bill also poses a further threat to firms’ investment plans. Without further amendment, the legislation will add even more to employers’ costs,” it said.
It added that firms also want to see real-world progress on the government’s economic strategies, movement on global trade talks, and no further tax rises on them to restore business confidence.
The UK’s economy reported further job losses in June as businesses grapple with a new minimum wage and increasing payroll taxes.
Data published by the Office for National Statistics on Thursday (17 July), shows that the number of employees on payrolls dropped by 41,000 in June.
In March to May 2025, average weekly earnings were up 5.0% on the year, both excluding and including bonuses. At 5.5%, public sector pay growth continues to outstrip the private sector, at 4.9%.
There were 727,000 job vacancies in April to June 2025, down 56,000 on the quarter. There have now been quarterly declines every month for the last three years.
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