UK data
Joanne Frew, Global Head of Employment & Pensions at DWF, commented:
“The UK labour market is facing heightened pressure as a result of the challenging economic climate and the continuous evolution of legislative and regulatory frameworks. The UK employment rate was estimated at 75.1% in June to August 2025. This is down in the latest quarter but above estimates of a year ago. The UK unemployment rate was estimated at 4.8% in the same period. This is up in the latest quarter and above estimates of a year ago. Ordinarily, we expect a surge in employment over the summer months with the hospitality sector driving an uptick in jobs. These figures highlight the significant strain on employers in the current environment.
“The estimated number of vacancies in the UK fell by 9,000 on the quarter, to 717,000 in July to September 2025 – the 39th consecutive fall. Vacancies decreased in nine of the 18 industry sectors. It is perhaps unsurprising that the long-term market trend in falling vacancies is continuing with employer confidence at such a low. We are seeing recruitment freezes in place as employers get to grips with the rising cost of employing people and the new framework of employee protection.
“Annual growth in employees’ average earnings in Great Britain for regular earnings was 4.7% and for total earnings was 5% in June to August 2025. The distinction between the public and private sector remains clear with annual average regular earnings growth at 4.4% in the private sector and 6% in the public sector. Employers continue to navigate sustained pressure from the workforce to align remuneration with the rising cost of living.
“With the Employment Rights Bill set to come into force imminently we can expect the first reforms in place before Christmas. Employers are taking a cautious approach to recruitment amid concerns over rising costs, reduced flexibility, and increased compliance burdens. Employers are looking to the Autumn Budget for greater clarity and reassurance amid ongoing economic uncertainty.
“A key message for employers is to get ahead of the reforms and plan ahead now to ensure they are in the best possible position to implement the changes. The legislative shift provides an opportunity to strengthen workplace protections and foster a more resilient, future-ready labour workforce.”
Scotland data
Ann-Frances Cooney, Employment & Pensions partner at DWF in Scotland, commented:
“Scotland’s labour market is under increasing pressure against a backdrop of a challenging economic climate and a new legislative and regulatory framework. The estimates for June to August 2025 indicate that over the quarter, the employment rate decreased while the unemployment and economic inactivity rates increased.
“The headline figures for the period show the employment rate in Scotland was estimated at 74.3%, down 0.6% over the quarter. By way of comparison, Scotland’s employment rate was below the UK rate of 75.1%. The unemployment rate in Scotland was 3.9%, up 0.2% over the quarter. Scotland’s unemployment rate was below the UK rate of 4.8%.
“The early seasonally adjusted estimates for September 2025 from HMRC Pay As You Earn Real Time Information indicate that median monthly pay for payrolled employees in Scotland was £2,600, an increase of 5.9% compared with September 2024. The combined effect of rising inflation and higher Employer National Insurance contributions is intensifying financial pressures on businesses, particularly as employees seek pay adjustments to keep pace with the cost of living.
“With a broad package of new employment rights set to take effect, employers are increasingly focused on future-proofing their workforce. Proactive preparation through strategic workforce planning and compliance readiness will be key as businesses assess the operational impact of the reforms and position themselves for long-term sustainability. Businesses are looking to the Autumn Budget for clearer policy direction and reassurance, as they seek to prepare for the evolving economic and regulatory landscape.”
Northern Ireland data
Jonathan Simpson, employment director at DWF in Belfast, commented:
“The labour market in Northern Ireland is facing ongoing pressure, resulting in a deceleration in employment growth. While HMRC payroll data indicates a rise in payrolled employees, the Labour Force Survey (LFS) presents a contrasting picture, showing a decline in the employment rate alongside increases in both unemployment and economic inactivity.
“Earnings from the HMRC PAYE indicated that Northern Ireland employees had a median monthly pay of £2,401 in September 2025, an increase of £32 over the month and an increase of £154 over the year. As the cost of living continues to rise, employees are placing greater emphasis on wage growth. Where employers are unable to respond competitively, this may prompt shifts in the labour market, with workers seeking roles that offer stronger financial security.
“The latest Northern Ireland seasonally adjusted unemployment rate for the period June to August 2025 was estimated at 2.6%. This represents an increase of 0.5% over the quarter and an increase of 0.8% over the year. The gradual rise in unemployment points to emerging challenges within the labour market. The proportion of people in work decreased by 0.9% over the quarter and decreased by 1.1% over the year to 71.2%. The latest figures reflect persistent economic uncertainty, compounded by rising employment costs. It remains to be seen whether the anticipated rollout of enhanced worker protections under the forthcoming 'Good Jobs' Employment Rights Bill will affect employers’ outlook and result in increased caution when it is introduced in 2026.
“The Northern Ireland labour market presents a mixed outlook. While signs of economic stagnation and recent redundancy announcements raise concerns, there are also encouraging indicators of investment and job creation, suggesting pockets of growth and resilience.”
