UK employers are adopting a deeply cautious approach to recruitment, with hiring intentions remaining at historically subdued levels amid mounting cost pressures.
This is according to the latest Labour Market Outlook report from the Chartered Institute of Personnel and Development (CIPD), published on Monday (16 February).
The quarterly survey, which polls thousands of organisations across sectors, reveals that the net employment balance, the difference between those expecting to increase staff numbers and those anticipating a decrease over the next three months, stands at just +7. This figure indicates ongoing restraint in hiring and is at an unprecedented low outside of the Covid pandemic.
Particularly stark is the situation in the public sector, where employment intentions have dropped to -11, meaning more employers expect workforce reductions than expansions. This marks four consecutive quarters of negative figures in that segment.
Concerns about upcoming regulations
A major driver of this caution is the impending impact of the Employment Rights Act (ERA), the flagship labour reforms introduced by the government.
The CIPD found that three-quarters (75%) of employers expect the changes to increase their employment costs significantly.
Many anticipate these added burdens could influence future hiring decisions, potentially leading to slower recruitment, reduced headcount, or greater reliance on automation and restructuring.
The reforms, aimed at enhancing worker protections, are raising concerns about higher administrative loads, increased workplace disputes, and broader financial strains on businesses already navigating a challenging economic environment.
Caution – but not decline
Despite the subdued hiring picture, the UK labour market shows signs of stability rather than sharp decline.
Key indicators such as pay expectations have held steady, with the median expected basic pay increase remaining at 3% for the seventh successive quarter across most sectors.
The CIPD’s findings align with a broader trend of employer caution, influenced by factors including global uncertainties, previous rises in employer National Insurance contributions, and minimum wage uplifts.
While the jobs market has cooled from post-pandemic highs, it has not tipped into widespread contraction.
Ben Willmott, Head of Public Policy at the CIPD, highlighted the need for careful implementation of the new laws.
He noted that while the reforms aim to improve working conditions, the scale of potential cost increases could have unintended consequences for jobs and growth if not managed through consultation and targeted adjustments.
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