Britain’s labour market is showing signs of strain, with recent data revealing a fall in job openings and growing pessimism among businesses, fuelling fears that the economy may be sliding towards recession.
Recruitment site Adzuna reported a 2.1% year-on-year decline in vacancies for August, driven by softer demand and higher employment costs, including the National Living Wage and employer National Insurance contributions. The downturn is most pronounced in London, the East of England, and the South West, affecting sectors such as nursing, teaching, healthcare, and hospitality. Graduates face the bleakest outlook, with entry-level roles down by more than a third since January.
The hiring slowdown coincides with warnings from the Confederation of British Industry (CBI), which indicates that companies across the private sector expect a continued decline in activity over the next three months. Alpesh Paleja, the CBI’s deputy chief economist, urged the Chancellor not to repeat last year’s approach of targeting firms with tax rises, warning that the business tax burden is already at a 25-year high.
Public sentiment is equally pessimistic. A survey by UKHospitality found almost half of 5,000 respondents believe their local high street is in worse shape than a year ago.
The timing of the downturn adds pressure on Labour as it heads into its party conference this week. Chancellor Rachel Reeves faces the challenge of addressing a £30bn hole in the public finances and is expected to unveil fresh tax measures in her Budget on 26 November.
Economists warn the employment data signals a downturn. Simon French, chief economist at Panmure Liberum, cited the Sahm Rule — which indicates a recession when unemployment rises by at least half a percentage point in a year. With UK joblessness up from 4.1% to 4.7% over 12 months, French said the increase was a “clear warning signal” for policymakers.
Business leaders share the concern. AO founder John Roberts has expressed belief that the UK may already be heading into recession, while hedge fund manager Robert Gibbins, known for betting against sub-prime mortgages before the 2008 crash, is now betting against Britain. Gibbins criticised both government and opposition leaders for failing to address structural issues such as energy capacity and artificial intelligence investment.
Employers are also delaying filling positions, taking nearly six weeks on average to hire. Analysts warn this could worsen once the incoming Employment Rights Bill takes effect, which will make it easier for staff to challenge dismissals at tribunal — a move that some fear could lead to a “blizzard of litigation” for companies already struggling with costs.
