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UK Jobs Market Cools Further With Payroll Drop and Tentative Hiring Uptick

Surveys point to a possible hiring bottom alongside multi‑year lows in pay growth.

Skyscrapers of the Canary Wharf commercial district are seen with The Shard building and construction cranes reflected in a perimeter glass wall of the viewing area of Garden at 120, in the City of London financial district, in London, Britain, September 23, 2025. REUTERS/Toby Melville
The sharp decline in hiring has bottomed out, figures suggest

Overview

  • BDO’s Employment Index fell for a third month to 93.30 in January, its weakest reading since March 2011, highlighting softer recruitment plans.
  • HMRC reported 43,000 fewer payrolled employees in December, the fourth straight monthly decline, with total payrolls down about 220,000 since October 2024.
  • REC-KPMG’s permanent hiring index rose to 46.9 in January, the highest in 18 months yet still below the 50 mark that denotes growth.
  • Hiring demand remains subdued with vacancies around early‑2021 levels and job postings roughly 26% below pre‑pandemic norms, while full‑time vacancies have fallen for 27 consecutive months.
  • Pay pressures have eased as posted wages grew 4.3% in December and private‑sector earnings rose 3.9%, with unemployment at 5.1% and the Bank of England projecting a peak near 5.3% this year.