Britain’s job market ‘floundering’ as companies remain cautious about hiring

Britain’s jobs market is “floundering” amid weak hiring demand, with only limited signs of recovery, data has revealed.Companies remain cautious about hiring staff amid cost pressures and economic uncertainty, according to two reports released on Monday. They show the labour market continues to be in a fragile position.A monthly employment index from BDO, an accountancy and consultancy firm, is running at its weakest level in nearly 15 years. It has had its worst reading since March 2011, when the jobs market was still recovering from the financial crash.The index – which monitors trends in hiring intentions, headcount and demand for labour – was 93.30 in February, the same figure as January, continuing a run of multi-year lows. Any figure above 95 represents growth and anything below shows a contraction.“While the pace of decline in the employment index has stabilised since the start of the year, there are limited signs of meaningful recovery in the near term,” the report said.The survey aligns with official figures that showed unemployment in the UK rose to a five-year-high of 5.2% in the final quarter of 2025 and a near-11-year high for young people. The Office for Budget Responsibility said last week unemployment would peak at 5.3% this year, up from its forecast in November of 4.9%. It said the rise had been caused by businesses cutting back on hiring rather than laying off staff, which had a bigger impact on young people who were entering the workforce.BDO also reported that its business output index – which measures activity across the main sectors in the British economy – rose to its highest level in a year. It increased to 98.80 in February, up from 97.67 the previous month, driven largely by a more buoyant services sector. The rise marked three consecutive months of recovery.However, Scott Knight, the head of growth at BDO, said: “Global disruption puts the spotlight firmly on the economy. While momentum is building in pockets of the economy, real growth is impossible without targeted action to fix the floundering labour market.”Similarly, a report from KPMG and the Recruitment and Employment Confederation (REC) indicated that demand for permanent hires and temporary workers continued to fall in February, although there were some signs of stabilisation.It found that permanent staff hires were still falling, but the decrease was at its lowest since March 2023. Although some recruiters said overall hiring conditions remained subdued, others noted a slight improvement in employers’ willingness to recruit staff.Jon Holt, the chief executive of KPMG UK, said businesses were again facing “unexpected economic shocks because of global events out of their control” as a result of the crisis in the Middle East. “Resilience is now the new normal, so it is likely we may see these signs of recovery stall again in the near term as chief execs take stock,” he said.The survey showed that engineering was the only sector to experience an improvement in demand for permanent staff during February. Retail and hotel and catering experienced the steepest reductions in permanent vacancies. Retail also showed the biggest drop in job vacancies for temporary workers.Neil Carberry, the chief executive of the REC, said: “A real turnaround requires growing confidence among businesses and consumers. There is cash in the system to spend if consumers and businesses feel better – a core goal of policy should be to tackle this by reducing the cost of doing business, which will in turn address the rising cost of living.”