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The number of job vacancies in the UK is at the lowest level for five years.
Roles fell to 707,000 between May and July, according to the Office for National Statistics (ONS) data. That’s the fewest vacancies since April 2021 during the COVID-19 pandemic.
The decline was driven by smaller businesses pausing hiring or not replacing leaving staff due to employment and other operating costs. The largest fall in vacancies was at small businesses employing between one and nine workers. They cut 8,000 vacancies.
Liz McKeown, ONS director of economic statistics, said:
“The labour market picture is little changed overall, with some softening still evident. Employment, unemployment and inactivity rates have all remained steady, while the number of employees on payroll fell slightly in the latest quarter.
“Vacancies remain broadly flat, though a small fall in the latest period puts them at the lowest level in more than five years. The latest decrease was driven mainly by smaller businesses, which cite labour and operating costs as reasons for not hiring new staff or replacing leavers.
“Regular wage growth has remained broadly stable in recent months. However, private sector pay growth has continued to ease, while public sector pay growth remains elevated due to the timing of the latest NHS pay awards.”
Reaction to UK job vacancies at five-year low
Alex Hall-Chen, principal policy advisor for employment at the Institute of Directors, said:
“If the government is to deliver on its promise of growth and prosperity in every postcode, it must take concrete steps to restore employer confidence and support job creation. This will require addressing the mounting costs and risks of employment that have resulted from the implementation of the Employment Rights Act, the hike in employer’s National Insurance contributions, and successive above-inflation increases to the minimum wage.
“The government has an opportunity in its response to its consultation on reforms to zero-hours and similar contracts to protect the flexibility that both employers and many workers value. As a first step, it should:
- Set the low hours threshold at 8 hours.
- Set the reference period at 52 weeks.
- Establish that seven days’ notice of shifts and changes to shifts should be presumed reasonable.
- Set the short notice period at 1 day.
“Without action to tackle the cost of employment, there is little prospect of employers having the confidence to grow their headcount.”
Patrick Milnes, head of policy for people and work at the British Chambers of Commerce, said:
“Although unemployment has held steady at 4.9%, this cannot hide the wider problems bedeviling the UK’s jobs market.
“Business confidence is at a post-pandemic low and the squeeze on firms’ finances shows no signs of easing.
“With last week’s announcement that changes to zero hours contracts could cost businesses almost £3bn, many will be reassessing their recruitment plans
“The BCC’s latest economic forecast suggests unemployment could reach 5.2% by Christmas, with youth unemployment spiraling to 17%, as businesses continue to face pressure from high labour costs.
“While Andy Burnham has spoken about a new deal on education and changes to apprenticeships, if businesses cannot afford to take people on then progress will be slow. The ONS cites a downturn in hiring among SMEs as the main driver of falling vacancies.
“The BCC’s cost stack calculator shows that costs for the average SME have increased by more than 70% in the last 10 years due to successive governments’ policies.
“Much more must now be done to bolster business confidence and unlock hiring by tackling cost pressures on firms, including a holiday on employer national insurance contributions for under 25s.”
Kevin Fitzgerald, UK MD at Employment Hero, said:
“The labour market needs confidence, and right now small businesses are still being asked to do a lot with very little room to manoeuvre. Today’s ONS figures show unemployment remains elevated, while businesses continue to deal with rising costs, more regulation and ongoing economic uncertainty. If we want businesses to hire, we need to make it easier for them to do so.
“That said, there are some green shoots. Our own platform data shows modest employment growth in sectors including construction, healthcare and retail, and we’re seeing particularly encouraging signs in the North of England, where both employment and wage growth outpaced London in July.
“The willingness to hire is there, but confidence is holding businesses back. Ahead of the Autumn Budget, the government needs to focus on creating the conditions for small businesses to grow and take people on. That means greater certainty, fewer barriers and policies that support businesses rather than pile more pressure on them. If we get that right, there’s a real opportunity to turn cautious optimism into stronger employment growth.”
