The UK’s job market has ground to a near-standstill, trapped in what experts are calling a persistent ‘low-hire, low-fire’ mode.
The latest BDO UK Labour Market Update shows businesses are clinging to existing staff while shying away from new recruitment, pushing the BDO Employment Index to 93.30 in January 2026 – its weakest level since March 2011.
While the general unemployment rate has worsened over the last year, this frozen state isn’t the result of mass layoffs sweeping across the economy. Instead, companies are prioritising caution, cost control, and resilience in the face of ongoing economic headwinds, the data shows.
Payrolled employment has declined for several consecutive months, with HMRC data showing a sharp drop of 43,000 in December 2025 alone – the steepest fall since the tail end of the pandemic. Vacancies have slumped to levels last seen in early 2021, reflecting a broad reluctance to bring on new hires.
“What we’re seeing here is a low-hire, low-fire labour market. Businesses are holding on to staff where they can, but they are reluctant to hire or invest while underlying conditions remain weak. The near-term clarity following the Budget has yet to result in a more fluid, dynamic labour market,” said Scott Knight, Head of Growth at BDO.
A corporate malaise
The data shows that businesses continue to grapple with elevated costs, subdued consumer demand, and a medium-term outlook that remains clouded despite pockets of improvement.
While the BDO Output Index edged up to 99.70 in January, its highest in over a year, and business optimism ticked slightly higher, these modest gains haven’t translated into bolder workforce decisions. Firms appear locked in a defensive posture, waiting for clearer signals of sustained growth before loosening the purse strings on recruitment.
For workers, the picture is mixed. On one hand, the ‘low-fire’ element offers a degree of job security, redundancies haven’t surged dramatically, and many employers are retaining talent rather than cutting headcount aggressively.
On the other hand, opportunities for career progression, job-switching, or entering the workforce are drying up. Hiring freezes and selective recruitment mean fewer openings, particularly for younger workers or those in sectors hit hardest by the slowdown.
Some silver lining
BDO warns that this stagnation risks creating a drag on the broader economy. A dynamic labour market typically fuels growth through better job matching, wage pressures that reflect productivity, and the reallocation of talent to more innovative or expanding firms.
In its absence, productivity can stagnate, and consumer confidence, already fragile, may weaken further if people feel trapped in roles with limited upside. Looking ahead, BDO suggests meaningful improvement in the Employment Index could arrive later in 2026, potentially as clearer economic signals emerge and overseas demand (particularly from Europe) strengthens.
Until then, the UK appears stuck in limbo: not collapsing into mass unemployment, but far from the vibrant, opportunity-rich jobs market many hoped for post-pandemic and post-Brexit.
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