
The UK labour market is becoming increasingly difficult to navigate, both for employers and for jobseekers. Unemployment levels rose to 4.4% in the three months to November, the latest figures from the Office for National Statistics show. Meanwhile, the number of job vacancies dropped for the 30th consecutive period, with 24,000 fewer job openings in Q4 2024 than in Q3.
Falling vacancies and rising unemployment come alongside a 5.6% increase in employees’ average annual earnings in September to November 2024. Increases in the minimum wage and employers’ national insurance contributions, which enter into force in April, will add to the cost of employment and are expected to further reduce employers’ appetite for hiring.
“The full impact of the changes to national insurance and the minimum wage won’t be fully seen until later in the year,” says Jane Gratton, deputy director of public policy at the British Chambers of Commerce. “However, the warning lights on recruitment, employment and training are already flashing.”
‘A difficult recipe’
Michael Stull, UK country manager at Manpower Group, a staffing and recruitment firm, describes the current situation as a hiring recession.
The warning lights on recruitment are already flashing
He adds the introduction of day-one rights for workers to the list of potential hiring risks. Such policies, he says, could lead not only to more hiring freezes but also to lower wages and job cuts in the future. “When you have low growth and a lot of risk, you’re going to be in a low-hiring environment. Add to that the post-election rhetoric and some policies that created a lot of concern in the business community and you get a pretty difficult recipe for the hiring world,” he says.
This is likely discomforting for the Labour government, which had ambitions to raise the employment rate to 80% by the end of this parliament. That target now looks “incredibly challenging”, according to Rebecca Florisson, principal analyst at the Work Foundation at Lancaster University.
Addressing skills shortages
But a low-hiring market can create opportunities for businesses looking to fills gaps in their workforce. The number of applicants per job posting in the UK doubled between 2022 and 2024 and remains high, according to data from LinkedIn.
What’s more, Doug Rode, managing director at Michael Page UK&I, a recruitment firm, believes employers will see an increase in applications in the early months of 2025, which is typical at the beginning of the year. “As always, I encourage businesses looking to hire to make the most of this time of year, when candidates are actively engaged in their job search,” he says.
It’s a lot easier to recruit when there’s less competition in the market
According to Stull, a downturn in the hiring market marks an ideal time for businesses to address any skills gaps. “Employers should look to acquire the skills they need for the future,” he says. “It’s a lot easier to recruit those people when there’s less competition in the market.”
But finding candidates with the right skills remains a challenge. Four in 10 (42%) HR professionals say less than half of the applications they receive meet all of the criteria listed in the job ad, according to a 2025 LinkedIn survey.
This makes identifying the right person for a role feel like “finding a needle in a haystack”, says Janine Chamberlin, the head of LinkedIn UK. “The mismatch between what companies need and the skills applicants have is a growing challenge for businesses, with technical and soft skills being some of the hardest for HR professionals to source,” she adds.
Stull notes that demand for data and analytics skills, for instance, is rising among his firm’s clients, as companies accelerate their adoption of AI.
The good news, according to Chamberlin, is that the UK workforce remains optimistic and open to new roles and opportunities. Firms therefore may be able to boost retention and address skills gaps by upskilling employees. Those that don’t may risk losing talent, with two thirds (61%) of UK professionals planning to look for a new job this year, according to LinkedIn.
Above all else, Stull encourages employers to change their mindset towards employees. “Organisations need to think about their workers not as an expense but as an asset,” he says.
Companies that invest in the skills they need for the future now will be best placed to emerge from the current hiring recession with the upper hand.

The UK labour market is becoming increasingly difficult to navigate, both for employers and for jobseekers. Unemployment levels rose to 4.4% in the three months to November, the latest figures from the Office for National Statistics show. Meanwhile, the number of job vacancies dropped for the 30th consecutive period, with 24,000 fewer job openings in Q4 2024 than in Q3.
Falling vacancies and rising unemployment come alongside a 5.6% increase in employees’ average annual earnings in September to November 2024. Increases in the minimum wage and employers’ national insurance contributions, which enter into force in April, will add to the cost of employment and are expected to further reduce employers’ appetite for hiring.
“The full impact of the changes to national insurance and the minimum wage won’t be fully seen until later in the year,” says Jane Gratton, deputy director of public policy at the British Chambers of Commerce. “However, the warning lights on recruitment, employment and training are already flashing.”