Intelligence
INTELLIGENCE: Employers scale back recruitment plans

Employer confidence in the UK labour market has slipped to its lowest level since the pandemic, according to new research by the Chartered Institute of Personnel and Development (CIPD), raising concerns over the resilience of workforce expansion plans in the face of intensifying cost pressures and economic uncertainty.
The CIPD’s latest ‘Labour Market Outlook’, based on a survey of over 2,000 employers, reveals that the proportion of businesses expecting to increase headcount over the next three months has fallen sharply. The net employment balance – the difference between those planning to hire and those planning to reduce staff – has dropped from +13 last quarter to +8, marking the weakest outlook outside of the pandemic since the measure was first recorded in 2014.
The deterioration is particularly stark among large private sector employers and within the retail sector, which has seen the net employment balance tumble from +23 in autumn 2024 to -19. Just 11% of retail employers anticipate hiring in the next three months, while 30% expect staff numbers to decline. A similar pattern is emerging in education, with net balances of -13 in compulsory and -7 in non-compulsory education institutions.
This shift in sentiment arrives as employers begin to absorb the impact of higher National Insurance Contributions and the uplift to the National Living Wage announced in last year’s Budget. James Cockett, senior labour market economist at the CIPD, warned that these developments, coupled with uncertainty surrounding the Employment Rights Bill, are dampening employer confidence at a precarious time.
Reflected in their hiring plans
“Employer confidence is low which is being reflected in their hiring plans,” said Cockett. “The Employment Rights Bill is landing in a fundamentally different landscape to the one expected when it formed part of the Labour manifesto in summer of last year… It’s vital the government works closely with employers to balance the very real risk of reductions in investment in people, training and technology with their desire to reduce poor employment practice.”
The public sector, traditionally more insulated from immediate market fluctuations, has also registered a fall into negative employment territory, from +3 to -4. Meanwhile, the overall proportion of employers planning to recruit in the coming quarter has slipped to 61%, down from 67% in autumn.
Redundancy intentions remain steady but elevated, with 24% of employers planning job cuts in the next three months – a figure consistent with last quarter but notably higher than the 21% reported in the autumn.
Beyond hiring intentions, the report sheds light on employers’ redundancy practices over the past year. More than a quarter (27%) of organisations implemented redundancy programmes, and half of these went beyond the statutory minimum in offering enhanced packages. Smaller businesses were more likely to stick to statutory levels, while larger employers displayed greater flexibility in supporting departing staff.
Despite legal provisions that exclude workers with less than two years of service from redundancy pay, the majority of employers surveyed (66%) provided some form of financial support to this group. A combined 48% offered either statutory or partial payments, suggesting a widespread recognition of the need to cushion the impact of job losses, even among more transient staff.
The outlook for pay remains static, with a median basic pay increase of 3% reported across all sectors. However, recruitment remains challenging, with hard-to-fill vacancies most prevalent in the public sector and particularly acute in education, where 45% of employers report difficulties.
Close consultation
As policymakers weigh the implementation of the Employment Rights Bill, the CIPD is calling for close consultation with business leaders to ensure reforms do not exacerbate current labour market fragility. The call for a phased rollout, accompanied by targeted guidance and support – especially for SMEs – underscores the delicate balance the government must strike between protecting workers and maintaining employer confidence.
Key labour market facts
• UK employers’ net employment balance has fallen to its lowest point outside the pandemic since 2014.
• Retail and education sectors are experiencing the sharpest contraction in hiring expectations.
• Redundancy levels remain elevated, with 24% of employers planning job cuts.
• Employers are increasingly concerned about rising employment costs and the potential impact of new legislation.
• The CIPD urges a collaborative, phased approach to implementing the Employment Rights Bill to avoid undermining workforce investment.