UK employers are continuing to scale back recruitment as rising employment costs and economic uncertainty weigh on hiring, research has revealed.
Job postings are down 11 per cent since the start of the year and now stand 32 per cent below their February 2020 pre-pandemic baseline, according to Indeed’s Mid-Year UK Labour Market Update report.
Hiring has weakened across most occupational categories, with only a handful of technology, engineering and healthcare roles recording year-on-year growth.
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The UK labour market remains under sustained pressure, according to Jack Kennedy, senior economist at Indeed.
“Hiring demand is falling across most parts of the economy, while posted wage growth is gradually cooling,” he said. “That is particularly challenging for graduates and younger workers, who are competing for fewer opportunities to gain an initial foothold.”
The slowdown comes as youth unemployment climbs the political agenda, with Alan Milburn warning Britain faces a “generational fault line”, while MPs have urged the government to “go further” in tackling youth joblessness.
Graduate opportunities continue to shrink
Graduate job postings are around 7 per cent lower than a year ago and at their lowest level for this point in the year since 2020, while summer job postings have fallen to a four-year low, limiting opportunities for students and school leavers.
Simon Roderick, managing director at recruiter Fram Search, said employers were becoming more selective about where they invested.
“Many employers are finding it increasingly difficult to balance the cost of hiring and developing graduates against wider commercial pressures and the rising cost of doing business. The system feels out of kilter, and there is a genuine risk of scarring if talented young people are unable to gain that crucial first step into the workplace,” he added.
Posted wage growth also slowed to 3.9 per cent annually in the three months to June, its lowest rate since February 2022, although pay pressures remained strongest in technology, healthcare and engineering.
Salary transparency has recovered to 58 per cent of job postings, as the government consults on stronger pay transparency and equal pay laws to “root out” unfairness. Meanwhile, remote and hybrid vacancies remained near a record high at 16.9 per cent.
Despite this, employers are increasingly seeking artificial intelligence skills as the government steps up efforts to accelerate AI adoption across the economy following the appointment of the UK’s first AI minister last month.
AI is now mentioned in a record 9.4 per cent of UK job postings, not just in tech but across marketing, finance, HR, management and scientific research.
“The result is a two-speed labour market, with weak overall hiring but rapidly growing demand for a new set of skills,” said Kennedy.
Searches for AI-related jobs have also risen sevenfold since ChatGPT launched in 2022.
Roderick added that AI was quickly becoming an essential workplace capability. “The old adage that you won’t be replaced by AI, but by someone who knows how to use AI, is becoming increasingly true,” he said.
“Employers are looking for people who can get the most from AI’s benefits, improving productivity and enabling better decision making, rather than simply replacing jobs.”
Focus on hiring quality
Despite AI affecting roles, Kerry White, director at HR consultancy and talent advisory firm RedGreen Partners, warned organisations against assuming candidates would accept weaker offers because there are fewer vacancies.
“The mistake some firms make in a cooling market is assuming they can lowball candidates or take longer to hire because there are fewer vacancies,” she said. “However, the skills your business needs are often the same skills your competitors need. The need to remain competitive for the best talent doesn’t change just because the market has cooled.”
White advised employers to use the slowdown to focus on the quality of their hiring rather than the quantity.
“A streamlined recruitment process, strong candidate experience and a clearly articulated employee value proposition remain essential,” she added. “The best candidates are still sought after, and organisations that continue to invest in attracting the right people will be well placed when the market gathers pace again.”
Roderick said employers that continued investing in graduates during quieter periods would be better placed when hiring demand recovered: “Those organisations that continue investing in graduates during quieter markets often benefit when conditions improve, as they have already developed the skills they need.”
For more information, read the CIPD’s report on the changing face of the youth labour market