Britain’s jobs market has slumped to levels last seen during the Covid pandemic, with vacancies falling to a five-year low as Labour’s tax hikes, soaring employment costs and mounting red tape leave businesses increasingly reluctant to recruit.
In another damning blow to Labour’s economic credibility, new figures from the Office for National Statistics (ONS) reveal that the number of job vacancies across Britain has fallen below 700,000 for the first time since April 2021, when the country was still grappling with the devastating economic consequences of coronavirus restrictions.
The figures show just 691,000 vacancies in the three months to September, down from 704,000 in the previous rolling quarter, as employers pull back from recruitment amid rising costs and uncertainty over the Government’s economic policies.
It is a particularly uncomfortable milestone for a Labour Government that promised to deliver economic growth, boost living standards and put more money into working people’s pockets.
Instead, Britain now finds itself with fewer job opportunities than at any point in more than five years, while businesses warn that the escalating cost of employing staff is making recruitment increasingly unaffordable.
Indeed, the latest vacancy figures represent the lowest level outside the pandemic since 2014.
And while ministers continue to insist the economy is demonstrating resilience, the warnings from employers and economists paint a considerably less reassuring picture.
Labour’s jobs tax comes home to roost
At the centre of growing criticism is Labour’s decision to increase employers’ National Insurance contributions in April 2025, alongside repeated rises in the National Living Wage and sweeping changes to employment legislation.
Although higher minimum wages benefit workers who receive them, businesses have repeatedly warned that the combined cost of these measures is discouraging recruitment, particularly among smaller firms and those employing younger or less experienced staff.
The ONS itself has acknowledged that smaller businesses appear to be particularly affected.
Vacancies among companies employing between one and nine people have fallen by a staggering 32.8 per cent over the past year.
The statistics agency said feedback from its survey suggested smaller employers may be holding back from recruiting because of increased labour costs.
That raises an uncomfortable question for Labour: what good are promises of higher wages and stronger employment protections if businesses increasingly cannot afford to take people on in the first place?
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, described the continued decline in vacancies as “a flashing red warning light for the labour market”.
He warned that weaker recruitment was being compounded by elevated employment costs, alongside the growing impact of artificial intelligence on hiring demand.
Andrew Wishart, an economist at Berenberg, also highlighted the longer-term deterioration in employment.
He said payroll employment had fallen by 181,000 since Labour announced its plans to increase the minimum wage and employers’ payroll taxes in October 2024.
While that decline cannot be attributed entirely to government policy, economists and business organisations have repeatedly identified Labour’s employment costs as an important factor behind weakening demand for workers.
Young people paying the price
Perhaps the most troubling consequences are being felt by young people attempting to enter the workforce.
For school leavers, graduates and those seeking their first opportunity to earn a living, a shrinking jobs market means fewer chances to gain experience, build careers and achieve financial independence.
Ben Harrison, director of the Work Foundation at Lancaster University, warned that Britain remained in the grip of a “jobs drought”.
He said the continued fall in vacancies risked shutting young people out of employment before they had even been given an opportunity to establish themselves.
Although youth unemployment fell from 16.4 per cent to 15.6 per cent in the three months to August, the rate remains substantially above the national unemployment figure of 4.7 per cent.
Businesses have warned that increases in employers’ National Insurance and minimum wage costs are making them more cautious about taking on inexperienced workers.
The London Chamber of Commerce and Industry reported that nine in ten businesses surveyed in the capital had not attempted to recruit any new staff for the second consecutive quarter.
Its chief executive, Karim Fatehi, warned: “When hiring gets this expensive, firms stop trying, and young people looking for a first job lose out first.”
It is a deeply concerning picture for a country that desperately needs to encourage enterprise, opportunity and economic independence.
Manufacturers hit by Labour’s triple whammy
Britain’s manufacturing industry is also sounding the alarm. Make UK, which represents manufacturers, reported that vacancies in the sector remained at 48,000 as companies continued to hold back from recruitment.
Jamie Cater, a senior policy manager at the organisation, blamed a combination of higher National Insurance contributions, increases in the National Living Wage and uncertainty surrounding Labour’s employment reforms.
He described the pressures as a “triple whammy” and called for action to address skills shortages and the growing disincentives to recruit young people.
The warnings suggest that the impact of Labour’s employment policies extends well beyond individual businesses, threatening the ability of important British industries to recruit and expand.
For a Government that repeatedly claims economic growth is its overriding priority, the mounting evidence of businesses abandoning hiring plans is hardly a ringing endorsement of its approach.
Wage growth sinks to Covid-era levels
The deterioration in recruitment comes alongside another worrying development for British workers.
Total earnings growth, including bonuses, has slowed to 3.7 per cent, its weakest pace since November 2020, when Britain was enduring the second Covid lockdown.
At the same time, rising energy prices are adding to inflationary pressures, threatening to squeeze household budgets further.
The contrast between private and public sector wage growth is particularly striking.
Regular earnings in the private sector increased by just three per cent in the three months to August, compared with 6.3 per cent in the public sector, although the latter figure was partly influenced by the timing of pay awards.
Martin Beck, chief economist at WPI Strategy, warned: “Higher energy prices are pushing inflation up just as earnings growth weakens, threatening a renewed squeeze on living standards.”
For millions of families already struggling with household bills, the prospect of weaker wage growth combined with higher living costs offers little comfort.
Another warning as jobs face the axe
The latest figures emerged as gambling giant Flutter, the owner of Paddy Power and Betfair, announced plans to cut 1,400 jobs across its UK and Ireland operations and supporting offices overseas.
The company explicitly linked the redundancies to substantial increases in UK gambling taxation announced in the previous autumn Budget.
Although the job losses span several countries, the announcement provides another stark illustration of how businesses are responding to higher UK tax burdens.
For Labour, which insists that its policies are designed to strengthen the economy, such announcements risk further undermining confidence in its approach to business and employment.
Ministers insist everything is improving
Despite the alarming decline in vacancies, Work and Pensions Secretary Pat McFadden struck an upbeat tone.
He insisted the latest figures demonstrated the resilience of Britain’s labour market, pointing to a fall in unemployment from 4.9 per cent to 4.7 per cent, its lowest level since July 2025.
Payroll employment also edged up by 13,000 in September to approximately 30.3 million.
Mr McFadden highlighted Britain’s employment rate as the third highest in the G7 and pointed to a partnership with the hospitality and retail sectors involving commitments to 200,000 jobs for young people outside education, employment or training.
Those improvements are welcome, but they do not erase the underlying weakness in recruitment.
A falling unemployment rate is undoubtedly positive, yet it offers limited reassurance to someone sending out dozens of job applications and discovering that fewer employers are hiring.
And the Bank of England has forecast that unemployment could rise to 5.1 per cent by the end of the year.
Conservatives demand an end to the jobs tax
Shadow Chancellor Andrew Griffith accused Labour of inflicting serious damage on employment opportunities through higher taxes and regulation.
He said: “You can’t get people into work if there are no jobs for them to go to.”
Mr Griffith called for National Insurance to be halved for young workers and for measures in Labour’s employment reforms to be reversed.
He argued that the Government should use the forthcoming Budget to tackle the difficulties facing young jobseekers rather than impose further burdens on employers.
The Chancellor now faces growing pressure to restore business confidence ahead of the Budget on October 28.
Labour promised growth. Britain got a jobs drought.
There are wider forces affecting Britain’s economy, including global uncertainty, higher energy prices and the increasing use of artificial intelligence.
Nor should the latest figures be mistaken for a collapse in employment: unemployment has fallen, payroll numbers have edged upwards and some economists believe the labour market may finally be stabilising.
But none of that excuses the Government from answering serious questions about the consequences of its decisions.
Labour chose to increase the cost of employing people. It chose to impose additional obligations on businesses. And it must now confront mounting evidence that employers, particularly small firms, are becoming increasingly reluctant to recruit.
The result is a country in which job vacancies have returned to levels last seen during the Covid era, young people face formidable barriers to employment and private-sector wage growth remains subdued.
Britain’s entrepreneurs and businesses are the people who create jobs, pay wages and generate the wealth needed to fund public services.
Yet rather than making it easier for them to expand, Labour stands accused of making every new employee an increasingly expensive commitment.
Five years ago, Britain’s jobs market was struggling with the aftermath of an unprecedented global pandemic. Today, vacancies are back at those levels without a nationwide lockdown.
Labour came to power promising to get Britain growing. Two years later, employers are increasingly reluctant to hire, jobseekers face a shrinking pool of opportunities and the Government is left trying to explain why its economic revolution looks alarmingly like a recruitment retreat.
The question for Labour is no longer simply where the growth has gone. It is where the jobs have gone with it.
