The Chartered Institute of Personnel and Development (CIPD) has warned that the UK jobs market stagnant conditions are becoming entrenched, with private sector employment intentions falling to their lowest level outside of the Covid-19 pandemic. Rising employment costs, driven by changes to employer national insurance contributions (NICs) and minimum wage increases, are deterring businesses from taking on new staff.
The CIPD’s net employment balance, which measures the difference between employers expecting headcount to rise and those planning cuts, is stuck at plus nine, near its lowest level outside of the pandemic. Private sector hiring intentions stand at a balance of plus 11, matching a record low for non-pandemic periods, according to the CIPD’s survey of more than 2,000 businesses.
Just 57 per cent of private sector employers plan to hire in the next three months, another joint low outside of the pandemic. Only 26 per cent of bosses expect staffing levels to rise over that period, while 17 per cent anticipate a decrease.
UK jobs market stagnant in ‘low hire, low fire’ pattern
The CIPD described the current environment as a “low hire, low fire” situation that is becoming the “new normal.” Redundancy levels have not risen alongside the decline in hiring, meaning workers already in posts are largely staying put, but those seeking to enter the workforce face a narrowing set of opportunities.
‘A stagnant labour market closes off routes into work for first-time jobseekers, blocks progression for existing employees, and erodes the talent pipeline organisations rely on to refresh skills and support innovation,’ said James Cockett, CIPD’s senior labour market economist.
The cost pressures behind the slowdown are well documented. People Management reports that 84 per cent of companies say their costs have risen following changes to employer NICs and the hike in the minimum wage, both of which were first announced in the autumn 2024 budget and came into force in April. That squeeze has fed directly into decisions on headcount, leaving employers unwilling to commit to new hires even as vacancies persist in certain sectors.
Skills shortages persist despite cooling demand
Despite the overall fall in vacancies, 31 per cent of employers are still reporting hard-to-fill roles. The CIPD said this points to continuing skills shortages in sectors such as construction, healthcare and social care, where demand for workers has not eased in the same way as the broader market.
The picture in care is particularly acute. According to the CIPD Labour Market Outlook, employers in care, social work and other healthcare activities reported the highest net employment balance of any sector at plus 47, meaning demand for staff in those roles remains well above the national average. Yet the supply of workers willing or able to fill those positions has been squeezed by policy changes to overseas recruitment. The CIPD Labour Market Outlook found that applications for visas for those wishing to work in care fell sharply following restrictions on bringing dependants imposed in March 2024, making recruitment challenges in the sector particularly strong.
That combination of high demand and constrained supply leaves care employers in a difficult position, caught between the imperative to fill roles and a reduced pool of applicants from both domestic and international sources.
CIPD calls for NIC reversal and wage reform
The CIPD has called on Andy Burnham to reverse the increases to employer NICs introduced under former Chancellor Rachel Reeves. The trade body also called for the planned abolition of age-based wage levels to be cancelled, arguing that both measures would make it easier for businesses to create entry-level roles and bring more young people into employment.
‘Our findings suggest that bolder measures are needed to give employers the confidence they need to hire, and in particular, to support young people into work,’ Cockett said.
The CIPD’s survey of more than 2,000 businesses provides a quarterly snapshot of hiring intentions across the UK private sector. With costs elevated and confidence low, the next quarterly reading will show whether April’s NIC and minimum wage changes have pushed intentions any lower still.
