Employers say increased prices imply they don’t seem to be recruiting
Chancellor Rachel Reeves (Picture: Getty)
Falling payrolls and vacancies are a results of corporations grappling with choices by Chancellor Rachel Reeves, together with increased Nationwide Insurance coverage (NI) payments, an elevated wage burden and more and more “utilizing automation to keep away from including headcount”, specialists have mentioned. They added younger individuals are bearing the brunt, as seen with NEET (younger individuals ‘Not in Training, Employment, or Coaching’) numbers approaching a million — and warned an entire technology is getting “locked out of labor” with profound “long-term financial and social penalties”.
Knowledge revealed this week confirmed emptiness numbers hit a close to five-year low within the newest quarter, with early estimates in January to March 2026 suggesting a lower of 29,000 (3.9%) vacancies to 711,000, in contrast with October to December 2025 — the bottom degree of vacancies since February to April 2021. The info additionally confirmed the quantity payrolled staff within the UK fell by 74,000 (0.2%) between February 2025 and February 2026, and decreased by 6,000 (0.0%) between January and February 2026.
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Between December 2025 and February 2026, the variety of payrolled staff fell by 87,000 (0.3%) over the yr and by 9,000 (0.0%) over the quarter. The early estimate of payrolled staff for March 2026 decreased by 65,000 (0.2%) on the yr, and by 11,000 (0.0%) on the month, to 30.3 million. Nevertheless, unemployment shocked analysts and fell to 4.9% between December 2025 and February 2026, down from 5.2% within the earlier quarter.
Younger employees are bearing the brunt, specialists mentioned (Picture: simonkr through Getty Photographs)
Liz McKeown, director of Financial Statistics on the ONS, mentioned: “The variety of employees on payroll remained broadly flat in latest intervals, reflecting ongoing weak hiring. Vacancies fell to their lowest degree in nearly 5 years, however with unemployment additionally falling the variety of vacancies per unemployed particular person stays broadly unchanged.”
Rohit Parmar-Mistry, founding father of Burton-on-Trent-based Pattrn Knowledge, an AI consultancy, mentioned “the labour market is being squeezed from each ends”.
He continued: “Employers are coping with increased wage prices, increased NI payments and weaker confidence, whereas youthful individuals are being informed to remain optimistic in an economic system that more and more affords insecurity, not development. That could be a harmful combine and it helps clarify why the NEETs drawback retains getting worse.
“AI is a part of this story, however not within the lazy manner individuals body it. Most corporations aren’t changing complete groups in a single day. What they’re doing is freezing junior hiring, stretching current employees additional, and utilizing automation to keep away from including headcount.
“That issues as a result of entry-level jobs are the place individuals be taught the habits and judgement that construct long-term careers. So the actual threat is just not robotic takeover tomorrow however a gradual hollowing out of the underside rung.
“If the federal government desires to deal with this severely, it must make hiring individuals really feel viable once more, not simply rejoice productiveness statistics whereas an entire technology will get locked out of labor.”
Tony Redondo, founding father of Newquay-based Cosmos Foreign money Alternate, is one such enterprise proprietor for whom hiring is just not viable within the present fiscal surroundings.
A dynamic and inclusive enterprise convention lounge scene exhibiting numerous professionals engaged in dialogue, teamwork, and networking. A businessman in a wheelchair is a part of the group, highlighting accessibility and equality in a contemporary company surroundings. (Picture: AleksandarGeorgiev through Getty Photographs)
He mentioned: “I’ve no intention of hiring anytime quickly. The Iran struggle’s impression on vitality costs, provide bottlenecks and inflation have not helped, however the root trigger is that this authorities’s economically illiterate insurance policies, which have left employers dealing with report taxes and regulatory burden.
“The inducement to run a enterprise is being systematically eroded. Most UK enterprise house owners I communicate with have shifted from development to survival, turning to AI brokers to fill entry-level roles.
“2026 shall be outlined by companies battening down the hatches. AI and automation are not rising applied sciences however needed shields towards an ideal storm of rising taxes, regulatory overreach, and hovering prices.”
Paul Denley, CEO of London-based Oakham Wealth Administration, mentioned AI had launched a “structural shift” into the UK jobs market.
He continued: “The growing sophistication of AI is easing strain on groups, enhancing productiveness with out the necessity for headcount. That doesn’t indicate an instantaneous impression on jobs, but it surely does recommend hiring choices could grow to be extra measured over time.
“Most regarding is the deteriorating outlook for younger individuals. The rise in NEETs factors to a deeper failure of entry-level alternative, which dangers turning into entrenched. Coverage should be directed at creating pathways into work. With out that, the long-term financial and social penalties could possibly be profound”
Katrina Younger, chief expertise officer and AI and digital transformation strategist at KYC Digital, mentioned AI was merely accelerating an current development: “Companies aren’t changing junior employees with AI programs. They’re merely not changing them in any respect.
“Entry-level roles are being absorbed into current headcount or quietly eradicated. That is being pushed not by expertise however by NIC will increase and Nationwide Residing Wage rises hitting margins the place junior hiring is most discretionary.
“AI is accelerating a shift that was already in movement. The sectors which have traditionally onboarded younger employees had been already contracting earlier than automation grew to become a reputable possibility for many corporations.
“The true threat is just not a future displacement occasion however a technology being shut out of the workforce whereas coverage targets the unsuitable trigger.”
Mary Maguire, managing director of Derby-based Astute Recruitment, mentioned “the UK’s SMEs have been hit by an ideal storm”.
She continued: “The dual tornadoes of Nationwide Insurance coverage and minimal wage will increase have merged with this yr’s Center East disaster, vitality shocks, advances in AI and basic financial gloom. The forecast seems set to stay very unsettled with no change in sight.”
Talking final month, Ms Reeves mentioned there was a “legitimate argument” that she shouldn’t have hiked employers’ nationwide insurance coverage contributions after the variety of jobless younger individuals rose. However the Chancellor insisted the transfer introduced in 2024 was wanted to place cash into public companies.
Showing earlier than Parliament’s Treasury Committee, Ms Reeves mentioned: “We did make the choice to extend nationwide insurance coverage in my first price range and that’s as a result of we would have liked to correctly fund public companies, together with the Nationwide Well being Service, which obtained a £29 billion-a-year uplift. So, I do recognise, and it’s a sound argument to say that that ought to not have occurred.
“But when that didn’t occur, we wouldn’t have been capable of put the cash into the NHS and cut back ready lists. And decreasing ready lists within the NHS can also be good for enterprise, as a result of it implies that extra individuals are out there for work, and the workforce is is more healthy.
“However I do recognise there are explicit points round youth unemployment. Numerous that, with respect, we inherited with a giant enhance within the younger individuals not in training, employment or coaching, however we face into that with actions approaching stream from subsequent month (April).”
The Chancellor mentioned the Authorities was increasing apprenticeship alternatives for younger individuals and pointed to her “youth assure”, committing to supply assured paid work for each eligible younger one who has been out of training or work for 18 months.
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