UK employers put costs before growth

The CIPD says UK employers are focusing on cost management ahead of growth as higher operating expenses and continued uncertainty weigh on decision-making. Its latest Labour Market Outlook, based on a survey of more than 2,000 employers, found that 58% now cite cost management as their main priority, ahead of improving productivity at 44% and growing market share at 35%.

Across sectors and organisation sizes, that preference for restraint was clear. The professional body said employers are contending with rising energy, supplier, and raw material costs, alongside higher employment costs linked to employer National Insurance and the National Minimum Wage. Although large private sector employers were more likely to prioritise productivity and market share than smaller businesses, the wider survey suggests many organisations are taking a cautious line.

Hiring plans improved slightly, but confidence remained weak. The net employment balance, which measures the difference between employers expecting staff levels to rise and those expecting them to fall over the next three months, stood at +10. Confidence was strongest in professional services, including legal and accounting, at +25, followed by IT at +20 and manufacturing at +19. At the other end of the scale, compulsory education registered -10, public administration and other public sector organisations stood at -9, and non-compulsory education came in at -5.

Redundancy expectations also remain elevated, with 22% of employers expecting to make redundancies in the next three months, rising to 26% in the public sector. Even so, the share planning to recruit rose from 60% last quarter to 63%, driven largely by stronger public sector hiring intentions, which increased from 70% to 77%.

James Cockett, senior labour market economist at the CIPD and author of the report, said: “Our survey finds that organisations are prioritising cost management above growth and productivity ambitions, reflecting the cautious approach many businesses are taking in response to sustained increases in labour, energy, and wider operating costs, with further increases expected this year.

“With employer confidence remaining low, it’s vital that government creates the right conditions employers need to invest, grow, and plan for the future. Targeted support for skills and workforce development and guidance to help employers comply with new measures in the Employment Rights Act will be crucial.

“With so much happening externally, organisations should focus on the areas they can directly influence. This means taking a proactive approach to workforce planning and ensuring investment in technologies such as AI is supported by the right mix of people, skills, and systems to deliver meaningful productivity gains.”

Pay expectations, meanwhile, are holding steady. Median expected basic pay increases remain at 3% for the eighth consecutive quarter, although the spread has narrowed, with more organisations clustering between 3% and 3.99%. Recruitment pressures have eased slightly compared with a year ago, but skills shortages have not disappeared, with a third of employers still reporting hard-to-fill vacancies. The latest Labour Market Outlook is available here.