UK employers cut bonuses and slow hiring as economy weakens
The UK jobs market is feeling the impact of the economic slowdown. Companies have reduced annual pay rises and are hiring fewer people.
Figures from the Office for National Statistics (ONS), published on Tuesday, show that unemployment rose slightly in the three months to June, but the official rate stayed at 4.7% — the highest in four years.
Pay growth, including bonuses, dropped from 5% to 4.6%. Without bonuses, pay growth stayed at 5%, meaning companies have mainly reduced extra incentives.
Job vacancies fell by 44,000 compared with the previous quarter — a drop of more than 5% — marking the 37th quarterly decline in a row. Vacancies are now at 718,000, well below pre-pandemic levels. The ONS said some companies are not hiring or replacing staff who leave.
Chancellor Rachel Reeves admitted the government still has “more to do” but defended Labour’s record. Speaking in Belfast, she said that since she became chancellor, there are 384,000 more people in work. She added that the government is committed to helping more people into jobs, saying there are “huge opportunities” in the economy.
Last month, figures showed the UK unemployment rate rose to 4.7% in the three months to May. Pay growth also slowed from 5.3% to 5%.
Suren Thiru, economics director at the accountancy group ICAEW, said April’s increase in employer national insurance is still making it harder for companies to hire. He warned the job market could get worse in the coming months because higher labour costs and possible tax rises in this autumn’s budget could push unemployment up.
He said the numbers supported the Bank of England’s view that jobs and pay growth are weakening. But he added this was unlikely to lead to another interest rate cut soon, after the recent quarter-point cut to 4%.
Markets had expected unemployment to stay at 4.7% and for earnings growth, including bonuses, to slow from 5% to 4.7%. The finance and business services sector had the lowest regular pay growth at 3.1%.
Surveys show companies are posting fewer job ads because of higher employment costs and worries about the economy. The Chartered Institute of Personnel and Development said hiring plans are at record lows, with young people hit hardest. Only 57% of private employers plan to hire in the next three months, down from 65% in autumn 2024, as they face an extra £25bn in national insurance costs and higher minimum wages since April.
Hannah Slaughter from the Resolution Foundation said unemployment is still 4.7%, but up from 4.2% a year ago and 3.9% before COVID. She said the “red hot” post-pandemic job market is over, with 165,000 fewer payrolled jobs in eight months, mostly in low-paid sectors like retail and hospitality. She predicted the government will resist a big minimum wage rise next year.
Private sector pay rose 4.8% in the year to June (0.7% after inflation). Public sector pay rose 5.7%.
Helen Whately from Labour said unemployment has risen every month for the past 10 months since Labour took power, meaning more families are struggling and more people claiming benefits.
Recruiter PageGroup reported a tough first half of the year, with revenue down 11% to £798.4m and pre-tax profit dropping 99% to just £0.2m. UK revenue fell 13.6%. CEO Nicholas Kirk blamed economic uncertainty for weaker hiring and longer recruitment times.
Published: 13th August 2025
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