The UK jobs market ended 2025 on a weak footing, with each everlasting and momentary hiring falling in December and unemployment already sitting at a four-year excessive.
A intently watched labour market survey by KPMG and the Recruitment and Employment Confederation (REC) exhibits that everlasting workers placements dropped to a four-month low on the finish of the yr, whereas momentary roles additionally declined. Vacancies continued to fall and the provision of staff rose sharply, underlining a market that’s loosening quite than rebounding.
The figures counsel that the uncertainty created by November’s Price range continues to be weighing closely on employers. Confidence amongst companies and households fell within the run-up to the fiscal occasion as companies braced for greater taxes and rising employment prices.
Separate knowledge revealed by the REC final week confirmed that the majority employers don’t anticipate a significant enhance in hiring throughout 2026. Companies stay constrained by greater payroll prices, together with will increase to the nationwide residing wage and the influence of decrease Nationwide Insurance coverage thresholds.
Neil Carberry, chief govt of the REC, mentioned December’s survey pointed to an additional deterioration in contrast with November, when the Price range was introduced late within the month. Whereas the general tempo of decline in placements was barely much less extreme than earlier within the winter, everlasting hiring fell at its quickest fee since August.
“Making this a greater yr for hiring would require a give attention to rebuilding enterprise confidence,” Carberry mentioned. “With the Price range now behind us, companies want a transparent and credible route from authorities — from the commercial technique to a extra pragmatic strategy to the Employment Rights Act, which is worrying many employers.”
The slowdown comes as unemployment has already reached 5.1 per cent within the remaining quarter of final yr, the very best degree in 4 years. Economists surveyed by The Instances consider the jobless fee might rise additional, probably reaching 5.5 per cent in 2026 — a degree not seen for greater than a decade.
Regardless of the softening labour market and sluggish financial progress, most economists and merchants anticipate the Financial institution of England to chop rates of interest not more than twice this yr. Decrease borrowing prices would assist ease the price of hiring and funding, however policymakers stay cautious amid persistent inflationary pressures.
The Financial institution of England’s newest survey of decision-makers exhibits that companies anticipate to scale back headcount in 2026, whereas wage settlements are forecast to edge down solely marginally, from 3.8 per cent to three.7 per cent.
That pressure is mirrored within the REC knowledge, which confirmed pay for everlasting workers rising on the quickest tempo since Might, suggesting inflationary strain has not absolutely disappeared. Non permanent pay additionally elevated in December after stagnating within the earlier two months, though general wage progress stays beneath its long-term common.
Regionally, the Midlands was the strongest performer and the one a part of England to file progress in momentary placements. Hiring continued to fall in London and throughout a lot of the north and south of England.
In the meantime, recruitment agency Morgan McKinley reported that vacancies in London’s monetary providers sector fell 16 per cent within the remaining quarter of 2025, though general job numbers within the sector have been nonetheless up 16 per cent yr on yr — highlighting how uneven the labour market has change into.
