Britain’s labour market is showing worrying signs of strain, with fresh data suggesting hiring demand has weakened significantly, leaving UK workers and jobseekers facing a difficult employment landscape in 2026.
Two separate reports released on Monday the 9th of March indicate that businesses remain cautious about recruiting staff as economic pressures continue to weigh on company finances. The findings suggest that while parts of the economy are showing modest improvement, the employment outlook for workers remains fragile.
A key indicator published by accountancy and consultancy firm BDO shows the UK employment index running at its lowest level in nearly 15 years. The index, which tracks hiring intentions, workforce headcount and demand for labour, recorded a reading of 93.30 in February, the same level as January.
Any figure above 95 signals growth, while anything below indicates contraction. The current level therefore points to a labour market that is still shrinking rather than expanding.
The figure represents the weakest level recorded since March 2011, when the UK jobs market was still recovering from the global financial crisis.
According to BDO’s report, the slowdown has stabilised slightly in recent months but there are few signs of a meaningful recovery in the near future. For many UK workers seeking employment, this suggests that competition for vacancies may remain high throughout the year.
The data also aligns with official figures showing unemployment rising to 5.2% in the final quarter of 2025, the highest level seen in five years. Youth unemployment has climbed even further, reaching its highest level in almost 11 years.
Forecasts from the Office for Budget Responsibility suggest unemployment could rise again to 5.3% during 2026, reflecting businesses slowing recruitment rather than carrying out large-scale layoffs.
However, some sectors are already seeing job losses.
In the retail industry, Asda recently confirmed redundancies affecting hundreds of roles across its business, as the supermarket giant continues a major restructuring programme aimed at reducing costs and modernising operations. The changes have included job cuts linked to store management structures and operational restructuring.
For workers in retail and hospitality, the outlook appears particularly challenging. Surveys conducted by KPMG and the Recruitment and Employment Confederation found that retail, hotel and catering recorded the steepest fall in permanent job vacancies during February.
Retail also experienced the largest drop in temporary job vacancies, suggesting that even short-term roles are becoming harder to find.
Engineering was the only sector to record an increase in demand for permanent staff, offering a rare bright spot for skilled workers and apprentices entering technical fields.
Meanwhile, broader economic indicators show mixed signals.
BDO’s business output index, which measures activity across key sectors of the British economy, rose to 98.80 in February, up from 97.67 in January. This marks the third consecutive month of improvement and the strongest reading in a year.
The recovery has largely been driven by growth in the services sector, which continues to play a major role in the UK economy.
However, experts warn that economic growth alone may not translate into job creation without greater confidence among businesses.
Scott Knight, head of growth at BDO, said global uncertainty continues to weigh on employment prospects. He warned that real economic growth will remain difficult without targeted action to strengthen the labour market.
Similarly, KPMG UK’s chief executive Jon Holt said businesses are dealing with ongoing economic shocks linked to global tensions, including instability in the Middle East.
For many employers, resilience has become the default approach, with leaders carefully reviewing recruitment plans before committing to new hires.
Recruitment and Employment Confederation chief executive Neil Carberry said confidence among both businesses and consumers will be key to reversing the slowdown.
He noted that money remains within the wider economic system but spending and hiring decisions depend heavily on confidence in future economic stability.
For UK workers and jobseekers, the message from the latest data is clear: while the economy shows pockets of resilience, the labour market itself remains under significant pressure.
At a time when the cost of living continues to challenge households across Britain, the strength and stability of employment opportunities will remain central to the wellbeing of the UK workforce.
The Workers Union continues to monitor developments affecting workers, jobseekers and the wider labour market as the economic outlook for 2026 evolves.
