Confidence among UK employers has fallen to lows seen only during the coronavirus pandemic as economic uncertainty over tariffs pile on top of rising costs for businesses.
The number of UK employers expecting to increase headcounts over the next three months fell to the lowest outside of the pandemic, the latest survey of more than 2,000 employers from the CIPD found.
Net employment balance dropped to +8, down from +21 in autumn 2024 and +13 in the previous quarter, while private sector net employment balance fell to just +11.
Meanwhile, 24 per cent of employers said they were planning to make redundancies over the next three months, showing little change on the previous quarter.
The median employer expecting to make redundancies over the next three months said it was planning to cut about five per cent of its workforce.
“From April, employers across the UK have begun to feel the full effect of increases to National Insurance Contributions and the National Living Wage outlined in last year’s budget,” explained James Cockett, senior labour market economist at the CIPD.
In the Autumn Budget last year, Chancellor Rachel Reeves hiked the National Living Wage for workers aged 21 and over by 6.7 per cent, while instituting a 1.2 percentage point increase for employers’ national insurance contributions to 15 per cent.
The retail sector has been particularly hard hit, with net employment balance falling from +23 in autumn 2024 to –19 this quarter.
Only 11 per cent of retail employers said they expected there will be an increase in their staff levels over the next three months, with 30 per cent expecting a fall.
“This report only confirms what we hear daily from the shop floor to the boardroom: confidence has collapsed,” said Andrew Griffith MP, shadow secretary of state for business and trade.
Employment Rights Bill hits employer sentiment
Overall, 61 per cent of employers said they were planning to recruit in the next three months, down from 64 per cent in the previous quarter and 67 per cent in autumn 2024.
This has been driven by a falling confidence among large private sector employers, with only 32 per cent planning increase staffing levels, down from 39 per cent last quarter.
The CIPD’s survey also found that the median expected basic pay increase has remained steady at three per cent, and is now three per cent across the public, private and voluntary sectors.
The survey comes as the government’s Employment Rights Bill passes through parliament, which includes sick pay for workers as soon as they begin in a new job and restrictions on ‘fire-and-rehire’.
“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,” explained Cockett.
“It was always going to be a huge change for employers but they’re operating in an even more complex world now. 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 government can address employer nerves around the bill by prioritising an implementation plan with a clear phased timeline, alongside support and guidance for employers, and smaller businesses in particular.”
