UK jobs market slowdown – what it could mean for your business?
The Bank of England governor, Andrew Bailey, has warned that the UK jobs market is showing early signs of slowing down. Speaking at a British Chambers of Commerce event, he pointed to two main drivers – higher employer National Insurance contributions (NICs) and rising overall costs.
In short, businesses are reacting by scaling back recruitment and holding back on pay rises. For many employers, this isn’t about wanting to cut back – it’s about protecting cashflow in a tougher environment.
The Bank’s Monetary Policy Committee will be watching closely when it meets in August to decide on interest rates, currently 4.25%. Bailey hinted he’s already seeing more evidence of companies adjusting staffing and pay since the NIC changes came into force earlier this year.
The wider economic picture is mixed. The UK economy grew by 0.7% in the first quarter of 2025, but April saw a 0.3% dip. PAYE data shows more than 100,000 jobs lost in May – the steepest monthly drop since the first COVID lockdown. Wage growth in the private sector is also easing, down to 5.1% in the three months to April from 5.9% earlier this year.
Some members of the Bank’s rate-setting committee are already pushing for cuts, with markets expecting rates to be down to around 3.75% by the end of the year. But Bailey’s message was clear – growth remains weak and global uncertainty, including new US trade measures, is adding to the pressure.
What this means for business owners
Slower job growth and pay restraint can create both challenges and opportunities. If you’re an employer, it’s a good time to:
- Review your staffing plans for the next 6–12 months.
- Assess the impact of higher NICs on your budget.
- Keep an eye on interest rate movements – they can affect borrowing costs, investment decisions, and customer spending power.
I help small businesses understand these shifts and make informed decisions so they’re not caught out by sudden changes in the economy.
