The latest official labour market statistics reveal a complex picture of resilience, regional variation, and cautious employer behaviour in the face of ongoing economic pressures. DWF’s employment law specialists examine what the figures mean for businesses across the UK, Scotland, and Northern Ireland — and how organisations can respond strategically to a shifting employment landscape.

UK Labour Market Overview – Resilient Employment but Declining Vacancies

The UK labour market remains stable in headline terms, but underlying indicators point to growing caution among employers. Between March and May 2025, the UK employment rate reached 75.2%, a slight increase on the previous quarter and above the same period last year. Unemployment stood at 4.7%, also higher than last year’s figure but down quarter-on-quarter.

However, the latest Office for National Statistics (ONS) data confirms a continuing downward trend in recruitment activity. From April to June 2025, the estimated number of job vacancies dropped by 56,000 to 727,000 — the 36th consecutive quarterly fall. Vacancies declined across 14 of 18 industry categories, suggesting that few sectors are immune to the slowdown.

Cautious Hiring Strategies

Ann Frances, Employment Partner at DWF, observes:

“Many UK employers are rethinking their hiring strategies, both to manage financial pressures and to prepare for an evolving regulatory framework. The anticipated introduction of new employment protections is prompting some organisations to pause recruitment or avoid replacing departing staff until there is greater clarity.”

Earnings and Cost Pressures

Average earnings growth is also showing signs of moderation. Between March and May 2025, both regular pay (excluding bonuses) and total pay (including bonuses) rose by 5% year-on-year. Public sector regular pay growth was 5.5%, compared to 4.9% in the private sector. Employers are balancing wage demands with increased costs, including higher National Insurance contributions.

The challenge is compounded by inflation rising unexpectedly to 3.6% in June 2025, up from 3.4% in May. This inflationary pressure erodes employees’ real income, increasing the likelihood of pay negotiations and demands for additional benefits.

Frances adds:

“The cost of living crisis means employers need to think beyond pay alone. Enhanced employee engagement, workplace flexibility, and a strong organisational culture can help retain talent in a market where direct salary competition is intense.”

Scotland Labour Market – Stability with Emerging Pressures

Scotland’s labour market demonstrates relative resilience despite wider economic headwinds. For the period March to May 2025, the employment rate increased to 74.9%, up 0.6% on the quarter but marginally below the UK-wide rate. The unemployment rate fell to 3.7%, a 0.5% drop over the quarter and notably lower than the UK average of 4.7%.

Median monthly pay for payrolled employees in Scotland reached £2,546 in June 2025, an annual increase of 5.4%. However, with inflation now at 3.6%, the gap between wage growth and rising living costs is narrowing, creating potential for renewed pay pressures in the months ahead.

A Strategic Pause in Hiring

Joanne Frew, Partner and Global Head of Employment & Pensions at DWF, notes:

“Scotland’s figures indicate short-term stability, but employers are taking a measured approach to expansion. The dual impact of incoming worker rights legislation and global trade factors, such as US tariffs, is leading many to review workforce strategies and ensure operational resilience.”

Northern Ireland Labour Market – Mixed Signals Amid Economic Uncertainty

In Northern Ireland, the latest figures show both encouraging and concerning trends. Over the year, payrolled employee numbers and average earnings have increased — positive indicators of a degree of resilience in formal employment. However, the unemployment rate and economic inactivity rate have both risen, while the overall employment rate has declined.

Median monthly pay stood at £2,344 in June 2025, representing a year-on-year increase of £26 but a monthly decrease of £28. The unemployment rate for March to May 2025 rose to 2.1%, up 0.6% on the quarter and 0.3% on the year. The employment rate fell to 72.1%, down 0.7% year-on-year.

Recruitment Activity Showing Early Signs of Recovery

Despite these challenges, there are indications of renewed recruitment activity. The Ulster Bank PMI survey for June 2025 recorded the first increase in hiring since January 2025, suggesting that some employers are cautiously adding to headcount.

Frances comments:

“The data shows a labour market that is adjusting rather than collapsing. Employers in Northern Ireland are facing the same inflationary and legislative pressures as elsewhere in the UK. If they cannot meet rising pay expectations, turnover risk will remain high.”

Key Takeaways for Employers Across the UK

The regional variations in labour market performance underline the need for tailored workforce strategies. The imminent ‘Good Jobs’ Employment Rights Bill and other regulatory changes mean that employment practices will require careful review to maintain compliance and competitiveness.

Frew concludes:

“Employers who take a proactive, people-focused approach — combining robust compliance with investment in culture, engagement, and transparent communication — will be best placed to navigate the uncertainty ahead. This is a moment to prepare, adapt, and ensure your workforce strategy is future-ready.”

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