Britain’s job market hits its worst level in nearly 15 years as companies freeze hiring
Britain’s labour market is teetering on the edge of a prolonged slump, with hiring intentions plummeting to levels not seen since the recovery from the 2008 financial crisis.
The BDO monthly employment index, which tracks hiring intentions, headcount, and labour demand, flatlined at 93.30 in February 2026, the same as January and its lowest point in nearly 15 years, dating back to March 2011.
Readings below 95 signal contraction, and experts warn that without targeted policy interventions, meaningful recovery remains elusive.
“Global disruption puts the spotlight firmly on the economy,” said Scott Knight, head of growth at BDO. “While momentum is building in pockets of the economy, real growth is impossible without targeted action to fix the floundering labour market.”
Official data from the Office for National Statistics (ONS) underscores the severity. Unemployment hit 5.2% in the October-to-December 2025 quarter, up from the previous period and marking a five-year high.
The employment rate dipped to 75.0%, while payrolled employees fell by 130,000 over the year, a 0.4% drop. Vacancies held steady at around 726,000 in early 2026 estimates, but they’ve been on a downward trajectory for months.
The Office for Budget Responsibility now forecasts unemployment peaking at 5.3% this year, revised up from 4.9%, with young people bearing the brunt as firms cut back on entry-level hires rather than layoffs.
Wage growth
Wage growth offers a mixed bag. Nominal average earnings rose 4.2% annually in the final quarter of 2025, but after adjusting for inflation, real wage growth was a meager 0.5% to 0.8% depending on the measure.
In the private sector, it lagged at 3.4%, while the public sector saw 7.2% growth, highlighting ongoing disparities.
Starting salaries for permanent roles climbed at the fastest pace in 18 months, driven by competition for skilled workers, according to the KPMG and Recruitment and Employment Confederation (REC) Report on Jobs.
Temporary pay also edged up, but overall placements continued to decline, though at a slower rate than before.
Sectoral growth
Sectoral divides are stark. Engineering bucked the trend with improved demand for permanent staff, while retail, hospitality, and nursing/medical care suffered the steepest drops in vacancies.
Permanent vacancies fell across all 10 monitored categories in the KPMG/REC survey, with temporary demand seeing a marginal uptick only in blue-collar roles.
Regionally, the Midlands showed pockets of growth in temporary billings, but London and the North of England lagged with steeper declines.
