Employer Confidence Hits Record Low: Unpacking the UK's Hiring Freeze
The UK labour market is experiencing a significant downturn, with employer confidence plummeting to unprecedented levels. The Chartered Institute of Personnel and Development (CIPD) recently reported that the net employment balance—a measure of hiring intentions—has fallen to +8, the lowest since 2014, excluding the pandemic period.
This decline is not isolated. The CIPD's Labour Market Outlook indicates that only 61% of employers plan to recruit in the coming quarter, down from 64% in the previous quarter and 67% in Autumn 2024. Moreover, nearly a quarter of employers anticipate making redundancies in the next three months.
What's Driving the Decline in Employer Confidence?
Several factors contribute to this downward trend:
Rising Employment Costs
Employers are grappling with increased financial burdens due to:
A £25 billion rise in National Insurance contributions.
An increase in the National Living Wage.
Anticipated impacts of the forthcoming Employment Rights Bill, which may impose additional responsibilities and costs on employers.
These factors have led to widespread hiring freezes and job cuts, particularly in sectors like retail and public services.
Economic Uncertainty
Falling employer confidence is both a reflection of and a contributor to wider economic strain in the UK. High interest rates, currently at 5.25%, have made borrowing more expensive, discouraging businesses from investing in growth or hiring. At the same time, inflation remains stubborn in key areas like food, energy and housing. While wage growth has slowed from last year’s highs, many employers still struggle to balance pay pressures with cost control.
Global uncertainty adds to the challenge. Conflicts abroad, ongoing supply chain issues, and concerns around the US economy make long-term planning more difficult. Brexit-related trade friction continues to affect smaller firms, and political uncertainty ahead of the next UK general election has caused some sectors to pause hiring or expansion.
In the labour market, a mismatch persists: employers face skill shortages in areas like care, logistics, and tech, even as job vacancies decline. All of this contributes to cautious employer behaviour — a trend with consequences for job seekers and the wider economy alike.
Sector-Specific Challenges
Certain sectors are facing unique pressures:
Retail Sector
The UK retail sector has been significantly impacted by rising operational costs and shifts in consumer behaviour. In 2024, approximately 13,000 retail stores closed, with projections indicating up to 17,350 closures in 2025. This downturn has led to the loss of nearly 170,000 retail jobs in 2024, with an additional 202,000 positions at risk in 2025. Factors contributing to this decline include increased National Insurance contributions, rising minimum wages, and new tax regulations adding £2.3 billion in costs to the sector.
Healthcare Sector
The healthcare sector, particularly the NHS, is facing financial constraints leading to staffing challenges. Over a third of NHS trusts are reducing clinical positions to manage budgets, with 40% considering further cuts. These measures are driven by the need to balance service delivery with financial sustainability.
Education Sector
Educational institutions are also experiencing staffing pressures due to budget constraints and declining student numbers in certain regions. Schools are reducing staff, and teacher recruitment has fallen below usual levels, impacting the quality of education and increasing workloads for existing staff.
Digital and Technology Sector
The digital sector accounted for 5.4% of the UK's filled jobs during the 2023/24 financial year, a slight decrease from 5.6% in the previous year. Employment in the telecommunications sector remained steady, with approximately 179,000 filled jobs. The 'Computer programming, consultancy and related activities' subsector contributed the majority of filled jobs in the digital sector, indicating a sustained demand for tech professionals.
The Broader Economic Impact
When employer confidence falls, the effects ripple far beyond individual organisations — they signal stress in the wider economy. The UK is currently experiencing several interlinked challenges that are reshaping the labour market and economic landscape.
Slowing Job Creation and Rising Unemployment Risk
The most immediate consequence of reduced employer confidence is a sharp drop in job creation. According to the Office for National Statistics (ONS), the number of job vacancies in the UK fell by 38,000 in the first quarter of 2025 — the 10th consecutive quarterly drop. This takes total vacancies down to 898,000, the lowest level since mid-2021.
At the same time, redundancy intentions have spiked, with nearly 24% of employers planning staff reductions in the next three months (CIPD Labour Market Outlook, Spring 2025). The unemployment rate, which had remained relatively stable at 4.2%, is expected to tick upwards in the coming months if these redundancies materialise.
Suppressed Wage Growth and Inflation Worries
Although wage growth soared during the 2022–2023 cost-of-living crisis, it has now begun to plateau. In March 2025, average total pay growth (including bonuses) fell to 5.6%, down from 6.1% in late 2024. This suggests employers are becoming more cautious with salary budgets — even in the face of continued inflationary pressure.
Meanwhile, core inflation remains sticky, especially in sectors like food, housing, and utilities. When wages stagnate but essential costs remain high, consumer spending contracts — reducing demand and slowing economic growth. It’s a vicious cycle.
Declining Business Investment
Low employer confidence often correlates with reduced investment in staff, technology, and growth. A 2025 report from the British Chambers of Commerce (BCC) found that only 18% of UK firms planned to increase investment in their workforce over the next 12 months — down from 29% in the same period last year.
Small and medium-sized enterprises (SMEs), which account for over 60% of UK private sector employment, are particularly affected. With tighter margins and greater exposure to cost increases, SMEs are scaling back hiring, training, and expansion plans. This has long-term consequences for innovation and productivity in the UK economy.
Regional Inequalities Are Widening
The downturn in hiring is not evenly distributed across the UK. Regions with historically weaker economies — such as parts of the North East, West Midlands, and coastal towns — are bearing the brunt of job losses and hiring freezes. According to the Centre for Cities, job listings in some local authorities have fallen by over 30% year-on-year.
This is compounding regional inequalities and making the government’s “levelling up” agenda even harder to achieve. When employers in these areas pull back, young people and lower-income households are the first to feel the consequences.
Reduced Confidence Among Jobseekers
It’s not just employers who are feeling the pinch — jobseekers are too. A 2025 Totaljobs survey found that 68% of active jobseekers in the UK now feel pessimistic about their chances of finding a role that matches their skills and expectations.
This can lead to a decline in morale, disengagement from the labour market, and long-term scarring for younger workers — particularly those entering the workforce during this downturn. It also puts pressure on mental health services and welfare systems.
Why This Matters for HR
For HR professionals, this context is critical. We’re not just navigating internal hiring decisions — we’re operating within a climate of economic anxiety, cautious boardrooms, and nervous candidates. Workforce planning must now account for uncertainty, talent retention, and employee wellbeing as strategic priorities.
Navigating the Challenges: Advice for Employers and HR Professionals
In light of these challenges, here are some strategies for employers and HR professionals:
Strategic Workforce Planning
Assess your organisation's long-term goals and align your workforce planning accordingly. Consider flexible staffing models to adapt to changing demands.
Invest in Employee Development
Focus on upskilling and reskilling your existing workforce to fill skill gaps and improve productivity. This investment can enhance employee engagement and retention.
Enhance Communication
Maintain transparent communication with employees about organisational changes and challenges. Open dialogue can build trust and foster a collaborative work environment.
Monitor Regulatory Changes
Stay informed about legislative developments, such as the Employment Rights Bill, and assess their potential impact on your organisation. Proactive compliance can mitigate risks and ensure smooth operations.
To conclude:
The record low in employer confidence reflects the complex interplay of rising costs, economic uncertainty, and sector-specific challenges. While the landscape is undoubtedly challenging, proactive and strategic HR practices can help organisations navigate these turbulent times. By focusing on workforce planning, employee development, and transparent communication, employers can build resilience and prepare for future growth.