Britain’s jobs market is currently facing significant challenges, described as “floundering” due to weak hiring demand and persistent economic uncertainty. Recent reports highlight a cautious attitude among businesses that are understandably hesitant to expand their workforce amid rising costs.
According to a monthly employment index released by BDO, an accounting and consultancy firm, the index has reached its lowest level in nearly 15 years, matching the worst reading since March 2011, a period still influenced by the aftermath of the financial crisis. The employment index, holding at 93.30 for February, has stagnated at this figure since January, suggesting a significant contraction in hiring intentions and demand for labour. Notably, scores above 95 signify growth, while those below indicate a decline.
The report indicates that, while the rate of decline may have stabilised since the beginning of the year, evidence of a meaningful recovery remains elusive. This trend aligns with official unemployment figures that revealed the UK’s jobless rate has surged to a five-year high of 5.2% in the last quarter of 2025, with youth unemployment also reaching alarming heights, marking a near-11-year high. According to the Office for Budget Responsibility, unemployment is projected to peak at 5.3% this year, a sharp increase from the previously estimated 4.9%.
The decline in hiring is attributed to companies pulling back on new recruitment rather than resorting to layoffs. This has particularly impacted young workers entering the job market, further compounding the issues faced by this demographic.
On a somewhat more positive note, BDO also reported an uptick in its business output index, which measures activity across various economic sectors. The index rose to 98.80 in February, up from 97.67 the previous month, largely spurred by an improving services sector. This marks three consecutive months of recovery in the business activity index; however, Scott Knight, head of growth at BDO, cautioned that “real growth is impossible without targeted action to fix the floundering labour market.”
Another report from KPMG and the Recruitment and Employment Confederation (REC) revealed a continued decline in demand for both permanent and temporary staff across the UK in February, though some signs of stabilisation were noted. Permanent staff hires experienced their least significant decline since March 2023, suggesting a flicker of cautious optimism, though overall hiring conditions remain subdued. Jon Holt, KPMG UK’s chief executive, noted, “Businesses are again facing unexpected economic shocks due to global events,” a sentiment reflective of the ongoing crisis in the Middle East.
The survey indicated that the engineering sector was the only area to see an improvement in demand for permanent staff during February, while retail and catering faced the steepest declines in job vacancies. In fact, retail also saw the most significant drop in temporary worker vacancies.
Neil Carberry, chief executive of the REC, emphasised that a true recovery hinges on restoring confidence among both businesses and consumers. He stated, “There is cash in the system to spend if consumers and businesses feel better.” He highlighted the urgent need for policies aimed at alleviating the rising cost of doing business, which could, in turn, address the escalating cost of living.
As Britain grapples with these pressing issues, the focus will be on how the government and business sectors navigate this precarious landscape. The current situation underscores the delicate balance between economic growth and the fundamental need for a robust, healthy labour market.
