UK Job Vacancies Fall to Five-Year Low as Small Firms Cut Hiring
Vacancies fell by 21,000 in the three months to September, with smaller businesses citing labour costs ahead of the Budget
By AXY Business Desk ·
Key points
- UK job vacancies fell by 21,000 to 691,000 in the three months to September, the largest fall since the start of the year.
- Vacancies are at their lowest level in more than five years, with the biggest decline in construction.
- Small firms cite labour costs, including energy costs and rises in National Insurance and the minimum wage, as a key reason for cutting back.
- Unemployment fell to 4.7%, but real wage growth was only 0.8%, and the government says too many young people are locked out of work.
UK job vacancies fell by 21,000 in the three months to September, to 691,000, the Office for National Statistics (ONS) said, as smaller businesses scaled back recruitment. It was the largest fall in vacancies since the start of the year, and the number of open jobs is now at its lowest level in more than five years. The largest decrease was in construction. The ONS said small firms were citing rising labour costs as a key factor in their decisions to hire less.
David Freeman, the ONS deputy director of labour market statistics, described the jobs market as “broadly flat”. He said the latest data showed the employment rate edging up and “a small drop in unemployment”, but that the number of workers on payroll remained slightly down over the same period. “The number of vacancies has seen its largest fall since the start of the year, concentrated mainly within smaller businesses, which cite increased labour costs as a key factor,” he said.
What the vacancy figures measure
A job vacancy is a paid post that an employer is actively trying to fill, and the ONS tracks the total through its surveys of businesses. Vacancies are one of the most closely watched indicators of demand for labour. When the number of open roles rises, employers are generally competing for staff and hiring is strong. When it falls, companies are pulling back, and job seekers tend to find it harder to move between roles or to find their first position.
The figures released this week are the last official snapshot of the jobs market before Chancellor John Healey presents his first Budget next week. Because the Budget sets tax and spending plans for the year ahead, the latest labour data will be read closely by businesses deciding whether to recruit, and by policymakers deciding how much room there is for economic support.
Why small firms are holding back
The ONS said smaller businesses were citing labour costs as a central reason for cutting back. Companies have pointed to several pressures at once. Energy costs have risen since the Iran war began, adding to the running costs of many firms. Businesses have also said that increases in National Insurance, the employer payroll tax paid on wages, and in the minimum wage, which in the UK is set by the government as the National Living Wage for older workers, have made each new employee more expensive to take on.
For a small firm, the arithmetic of hiring is especially tight. A business with a few employees has less scope than a large company to absorb a rise in payroll costs across a big workforce, and fewer spare staff to cover a vacancy that goes unfilled. When costs rise and demand is uncertain, a common response is to delay hiring rather than cut existing staff, which may help explain why the fall in vacancies has been larger than the drop in employment so far.
Analysts often note that vacancy numbers can move faster than unemployment. A company that decides not to advertise a role does not show up immediately as job losses, which is one reason why the headline unemployment rate can remain low even as the number of open positions shrinks.
A labour market that is holding steady
The picture from the ONS is mixed rather than uniformly weak. The unemployment rate fell to 4.7% in the three months to August, its lowest level for more than a year. The employment rate edged up, and the number of workers on payroll, while still slightly down over the period, may be starting to level off in the most recent month, according to the data.
Pay is also rising. Average earnings excluding bonuses grew 3.7% in the three months to August. Taking inflation into account, wages grew 0.8% in real terms, meaning that after rising prices are factored in, workers’ pay is only modestly higher in purchasing power. Real wage growth is what determines whether households feel better off, and a small real gain leaves many families with limited room to absorb higher bills.
The ONS data therefore describe a labour market that is not collapsing, but is also not generating much new demand for staff. Fewer vacancies combined with a low unemployment rate suggests that the market is cooling gradually, with workers still in jobs but fewer openings to move into.
Government response and the debate over young people
Pat McFadden, the Secretary of State for Work and Pensions, said the figures “show the resilience of our labour market”. He pointed out that the UK’s employment rate is “now the third highest in the G7, despite a backdrop of global uncertainty”. The G7 is the group of major advanced economies, and a high employment rate relative to peers is a point the government is likely to continue to emphasise.
Mr McFadden also acknowledged a more difficult issue. He said that “too many young people still find themselves locked out of employment”. Entry-level roles are often the first to be affected when employers hold back on recruitment, because they are among the cheapest to advertise for but also the easiest to delay. Young people trying to start their careers may therefore feel the effects of a slowdown in hiring more sharply than older workers who are already established in their jobs.
What it means for workers and households
For people looking for work, a fall in vacancies means fewer options and potentially longer searches, especially in sectors where demand has dropped. The largest decline recorded in construction suggests that workers in that industry may face more competition for available roles. For those already employed, slower hiring can mean less pressure on employers to raise pay, which helps explain why real wage growth remains thin.
For households, the combination of rising costs for energy and the cost pressures on businesses can feed through in different ways. Companies that face higher payroll bills may choose to keep prices higher, hold back on pay rises, or recruit less. Each of these options affects family budgets, and the balance between them will shape how the slowdown is felt across the economy.
The Budget and what to watch next
The next Budget will be closely watched for its response to the labour market. Analysts expect the government to weigh the strain on small firms against its goals for employment and public finances, though the exact measures are not yet known from the source material. Any changes to National Insurance or the minimum wage would directly affect the cost calculations that small businesses are currently making.
Several indicators will help show whether the trend continues. The vacancy figures will show whether the fall in open roles deepens or stabilises. The payroll data, which the ONS has said may be starting to level off, will indicate whether employment is steadying. The unemployment rate and wage growth will reveal whether a cooling market is turning into a rise in joblessness or is simply settling at a lower pace of hiring.
For now, the latest ONS figures point to a jobs market that is holding up on the headline measures but losing momentum beneath the surface. Whether that softening becomes more pronounced will depend on costs, confidence among smaller firms, and the policy decisions that follow next week’s Budget.
Questions and answers
How many job vacancies fell in the UK?
UK job vacancies fell by 21,000 in the three months to September, to 691,000, according to the Office for National Statistics. It was the largest fall since the start of the year.
Why are small firms cutting back on recruitment?
The ONS said smaller businesses were citing labour costs as a key factor. Companies pointed to higher energy costs since the Iran war began, and to increases in National Insurance and the minimum wage.
What is the UK unemployment rate?
The unemployment rate fell to 4.7% in the three months to August, its lowest level for more than a year, according to the ONS.
What happens next for the UK jobs market?
The figures are the last official jobs snapshot before Chancellor John Healey presents his first Budget next week. Analysts will watch vacancy, payroll and wage data to judge whether the slowdown deepens.
Topics: UK job vacancies, Office for National Statistics, Small businesses, Labour market, Unemployment, National Insurance, UK Budget
Sources: BBC Business RSS
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