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DWF employment law experts examine latest labour market data

16 May 2023

DWF's Employment law experts take a look at the latest labour market data for the UK and Scotland.

UK wide data

The latest employment ONS figures representing the first quarter of a new year for the period January 2023 to March 2023 show continued strength in the labour market.  The highlights for the period show a UK employment rate of 75.9%, 0.2% higher than the previous quarter.  The increase in employment was driven by part-time employees and self-employed workers.  The UK unemployment rate for the same period was estimated at 3.9%, an increase of 0.1% from the previous quarter.  The UK economic inactivity rate decreased by 0.4% point over the quarter, to 21%.  Despite being captured from a quieter post-Christmas period, the employment figures are an encouraging start to the year.  

In February to April 2023 the estimated number of vacancies fell by 55,000 over the quarter to 1,083,000.  This is the 10th consecutive fall and demonstrates a cautious approach to recruitment across all industries as the uncertainty created by the economic climate continues to take its toll.  

Real terms growth in pay continues to be a problem.  Growth in average total pay (including bonuses) was 5.8% and growth in regular pay (excluding bonuses) was 6.7% among employees in the period January to March 2023.  Taking into account inflation, in real terms growth in total and regular pay fell on the year by 3% for total pay and by 2% for regular pay.  With the increase in the cost of living, we are likely to see continued movement in the labour market as employees seek higher pay to meet their outgoings.  As the pay challenge continues it is no surprise that industrial unrest remains an issue.  There were 556,000 working days lost because of labour disputes in March 2023, an increase from 332,000 in February 2023.  

Commenting on the Uk data, Joanne Frew, Global Head of Employment and Pensions at DWF, said: "With a number of employment law changes announced last week through the Smarter Regulation to Grow the Economy policy paper we will have to wait and see what impact this may have on the labour market.  One key change which is likely to open up the labour market is the proposed limit in the length of non-compete clauses to three months providing employees with more flexibility to join a competitor."

Scotland data

Despite the ongoing economic challenges, Scotland's labour market is showing continued resilience as the figures for the period January to March 2023 are released.  The headline figures show an estimated employment rate of 75.3%, a decrease of 1.2% over the quarter.  By way of comparison, Scotland's estimated employment rate was slightly below the UK rate of 75.9%.  Scotland's unemployment rate was 3.1%, 0.2% lower than the previous quarter.  Scotland's unemployment rate was below the UK rate of 3.9%.  The estimated economic inactivity rate in Scotland was 22.2%, an increase of 1.4% over the quarter.  Such marginal changes over the quarter represent an encouraging start to the year and a robust labour market against the backdrop of the cost of living crisis.   

Commenting on the Scottish data, Ann Frances Cooney, partner leading the Scottish employment law practice, added: "As we look ahead we anticipate Scotland will continue to face industrial unrest as real terms pay struggles to keep up with soaring prices.  We may also see a more active labour market as employees seek higher pay by moving employment.  Employers should be focusing on the retention of core talent to help ride out the challenging economic environment.  With lucrative pay packages not always being an option as a key differentiator, workplace culture and employee engagement has never been more important."  

Further Reading