No Money. No Jobs

The cost of doing business has risen and employers are reluctant to take on staff. The government must now undo the damage done to the business case for employing staff.

This is the view of Anna Leach, the chief economist at the Institute of Directors. Leach was reviewing the latest ONS labour market data. She said: “Private sector pay growth has dropped below 3% for the first time since 2020 and job vacancy levels are very weak.

“As a first step, the new Labour Prime Minister should instigate meaningful ongoing tripartite discussions on the implementation of the Employment Rights Act, starting with the right to guaranteed hours. This will help better address the risk that higher labour market regulations lead to permanently lower job availability.”

Damage has been done

Leach continued: “Low levels of employer demand for labour unfortunately reflect a combination of government policies which have increased the cost and risk associated with hiring employees. This is choking off work opportunities for young people, in particular, as jobs continue to decline in important youth employment sectors such as accommodation and food & retail and the appetite to employ apprentices reduces.”

ONS labour market data

The last year has seen 103,000 fewer people on the payroll and contributing PAYE. The UK employment rate for people aged 16 to 64 years is about 75.0%.

In the UK, there 1.712 million people of working age and who are able to work, claiming unemployment benefit. 

The estimated number of vacancies in the UK decreased in the latest quarter. Early estimates for March to May 2026 suggest a decrease of 19,000 (2.6%) to 707,000, compared with December 2025 to February 2026. This is the lowest level of vacancies since February to April 2021.

The estimated number of workforce jobs in the UK was 36.8 million in March 2026. This is actually an increase of 256,000 from December 2025, with an increase of 177,000 in the number of self-employment jobs.

However, over the year, the estimated number of workforce jobs was down by 98,000. The number of newly self-employed was skewed as most (127,000) were returning to work rather than being self-employed for the first time. A further circa 30,000 self-employed people gave up and went on the cards.

 Annual growth in employees' average earnings was 3.4% for regular earnings (excluding bonuses), and 4.4% for total earnings (including bonuses) in February to April 2026. Annual average regular earnings growth was 5.1% for the public sector’s 6.19 million workers and 2.9% for the private sector.

Inflation

When public and private wage rises are combined and adjusted for inflation using the Consumer Prices Index, they were barely worth anything – circa 0.1%. Those benefiting from bonuses did better, with the real value of their wage rises being circa 1.2%.

Picture: Despite wanting to get more people into work, the Labour government has caused the job market to stall according to the Institute of Directors.

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