UK employment at 12-year low amid rising labour costs and global uncertainty

• Businesses curb hiring as vacancies fall below pre-pandemic levels for first time since May 2021, amid rising labour costs and a rapidly changing global trade landscape
• Decline in business output shows serious challenges facing UK companies
• Business confidence at weakest point in four years, comparable to national lockdowns

The latest Business Trends report from BDO, the business advisory and accountancy firm, reveals UK employment has reached a new 12-year low as businesses grapple with rising labour costs and global uncertainty.

This drop in the BDO Employment Index signals further cooling of the UK jobs market, with vacancies continuing to decline in Q1 and falling below pre-pandemic levels for the first time in four years. Early estimates also indicate the number of payrolled employees fell by 78,000 in March.

This raises new concerns that businesses are pulling back hiring in response to be mounting cost pressures and employment overheads, including National Insurance Contribution (NICs) and the increased minimum wage, which came into effect in April.

These domestic pressures have been compounded by ongoing international headwinds, including the ever-evolving international trade picture. While separate research from BDO indicates that mid-sized businesses’ international growth ambitions remain strong, business output stalled in April. The BDO Output Index fell from 98.23 to 96.90 - its sharpest monthly decline since October 2023, when the conflict in the Middle East started. Recent trade agreements, including the India–UK deal and the US–UK deal, could be a positive signal for businesses, but their immediate impact on output remains uncertain.

This drop reverses the modest gains seen in March, when the Output Index improved slightly, and points to renewed weakness in the economy driven in large part by the services sector. Services output fell from 98.72 to 97.17 this month as a result of softer international demand following the US tariffs announcements and their subsequent impact on financial markets.

A fall in business confidence also contributed to the weaking employment market. BDO’s Optimism Index, which measures business confidence across two of the UK’s major sectors - manufacturing and services - fell to 91.36 last month amid rising labour costs, including NICs and minimum wage increase, alongside global trade uncertainties. This is the lowest Optimism reading since January 2021, when the UK was entering its third national lockdown.

The decline was broad-based but particularly driven by the services sector, which showed uncharacteristic weakness and weighed heavily on the overall Optimism Index.

Scott Knight, Head of Growth at BDO said, “Month on month we’re seeing the bleak impact of the increased tax burden, greater regulation and global instability on UK businesses. For mid-market companies to thrive they need space to focus on day-to-day operations rather than constant firefighting. It is practically impossible for businesses to plan and invest with so much instability. The Chancellor must act quickly to provide better access to capital, skills support and market stability.”

ENDS

Overview of the BDO indices

An overview of all four indices is provided in the table below, detailing figures for the last three months and the same month of the previous year, to allow for comparison. 100 = average value. Above 95 = positive.

BDO’s Business Trends is a ‘poll of polls’ and comprises multiple surveys covering 4,000 respondents. Further information on outputs is available on request, but please note the Labour Force Survey is not one of them.
 

	April 2025 (Figures for this report)	March 2025	February 2024	January 2024
BDO Optimism Index	91.36	92.43	91.40	92.20
BDO Output Index	96.90	98.23	98.17	97.73
BDO Inflation Index	98.73	97.45	97.94	97.08
BDO Employment Index	94.11	94.32	94.30	94.72

Note to editors 

BDO LLP operates in 18 offices across the UK, employing 8,000 people. It has UK revenues of £1bn. 

It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing services predominantly to mid-sized, entrepreneurially-spirited, high-growth businesses that are driving growth in the UK economy. BDO calls this segment of the market the UK’s economic engine. 

BDO LLP is the UK member firm of the BDO international network. 

BDO’s global network The BDO global network provides business advisory services in 166 countries and territories, with more than 119,000 people working out of 1,800 offices worldwide. It has revenues of US$15bn.

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