Job vacancies have fallen sharply to their lowest level in years outside of the pandemic, as employers freeze recruitment amid rising employment costs and growing unease about Labour’s economic policies.
The number of job vacancies fell to 761,000 in the three months to April, according to the Office for National Statistics (ONS), a steep drop from 804,000 in the previous quarter.
Economists and business groups point to the Chancellor Rachel Reeves’s Budget, delivered last October, which included a £25 billion National Insurance increase as part of Labour’s effort to fund public services and reduce borrowing.
Employers have warned the move, combined with a significant rise in the minimum wage to £11.44 an hour in April, has added pressure to already stretched margins, particularly in low-wage sectors like hospitality and retail.
Since the Budget, businesses have cut more than 150,000 jobs, with 33,000 payrolled positions lost in April alone, according to the ONS — the third straight month of decline.
Thomas Pugh, economist at RSM UK, said the impact has been uneven: “Nearly 70% of payroll losses since the Budget have come from the hospitality and retail sectors, which are most exposed to sharp increases in employment costs.”
Meanwhile, the unemployment rate rose to 4.5% in the three months to March, up from 4.4% previously. Though still low by historical standards, it reflects a softening labour market that contrasts with the Government’s claims of stable economic stewardship.
A senior business leader speaking on condition of anonymity told the Post: “Labour seem utterly determined to price people out of jobs. Hiking taxes and wages at the same time, in the middle of an economic slowdown, isn’t just bad policy. It’s madness. Labour are categorically mad. Who would want to run a business under Labour?”
Concerns are also mounting over Labour’s proposed reforms to employment law. Deputy Prime Minister Angela Rayner has confirmed plans to introduce a package of workers’ rights legislation, including bans on zero-hours contracts and “fire and rehire” practices, by the summer. While these have been welcomed by trade unions, many businesses argue the reforms could increase regulatory burdens and hiring risk at a time of economic uncertainty.
Jack Kennedy, senior economist at jobs platform Indeed told The Telegraph: “The labour market has lost momentum. Employers are grappling with rising costs and policy uncertainty, particularly around the shape and scope of the Government’s Employment Rights Bill.”
Despite weakening demand for workers, wage growth remains strong. Average earnings excluding bonuses rose 5.6%in the three months to March, driven by sharp increases in the lowest-paid sectors. Retail and hospitality saw average pay grow 7.4% year-on-year, compared to 4% in finance.
The Bank of England, which cut interest rates to 4.25% last week, has warned that continued wage pressure could slow the pace of future rate reductions, even as economic activity cools.
Ruth Gregory, from Capital Economics, said: “It’s a tricky position for the Bank. The labour market is clearly weakening, but elevated wage growth may keep inflation stickier than hoped — delaying more aggressive monetary easing.”
Critics of the Labour Government continue to argue that Labour’s economic policies are damaging competitiveness and job creation, particularly among small and medium-sized businesses.
