UK employment stagnates at 13-year low but output shows signs of summer recovery
UK employment stagnates at 13-year low but output shows signs of summer recovery
- UK employment stalls as labour costs weaken business confidence
- Services sector leads growth with slight rebound in output, driven by stronger consumer spending and good weather
- UK businesses remain cautious amid policy uncertainty and elevated cost pressures
The UK’s employment outlook remains stagnant, with labour market stuck near its lowest level in over a decade, even as the broader economy shows early signs of a summer recovery, according to the latest Business Trends report from accountancy and business advisory firm BDO.
The Employment Index fell again in June to 94.22 from 94.32 the previous month, nearly at a 13-year low. Despite some positive output signals from the services sector, hiring remains subdued as businesses continue to grapple with cost pressures, most notably the increase in National Insurance Contributions (NICs) introduced in April.
Demand for labour is adjusting in response, with many firms holding back on recruitment. This caution is reflected in payrolled employment figures, which fell by 109,000 in May — nearly twice the drop seen in April — pointing to a possible acceleration in job losses.
Business confidence continues to remain underwhelming, with BDO’s Optimism Index falling to 91.58 from 92.30 in the previous month. Core cost pressures, particularly around labour, continue to drag on margins, with the prospect of further tax rises in the Autumn adding further to a cautious sentiment. Greater certainty following recent trade agreements with the US, EU and India offered a small boost to manufacturing business sentiment, but the sector remains volatile with no clear easing of these headwinds in sight. BDO’s Business Trends report predicts optimism will stay well below long-term averages through the second half of the year.
Services sector shows signs of summer recovery
There are some positive signals in the UK economy, with the BDO Output Index rising from 97.16 in May to 97.51 at the end of June, marking two months of consecutive increase.
This marginal growth was again propped up by the services sector, where activity climbed to 97.75. Easing inflationary pressures and reduced uncertainty around trade deals are beginning to lift the Index, whilst good weather in June - particularly during key events in the hospitality calendar such as Royal Ascot – likely supported consumer spending and boosted activity across hospitality and leisure.
Scott Knight, Head of Growth at BDO, said: “We’re seeing early signs of recovery in business output, largely down to the services sector who have buoyed the economy for a second month in a row.
“But, as we all know, we can’t rely on good weather forever. Businesses are treading carefully in wait-and-see mode when they need to be bold in their recruitment and investment. Without lower labour costs, clear signalling from government and a stable policy environment, growth will remain subdued.”
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 comprises multiple surveys covering 4,000 respondents. Further information on inputs and the data included is available on request, but please note the ONS Labour Force Survey is not one of them.
|
June 2025 (Figures for this report) |
May 2025 |
April 2025 |
March 2025 |
|
|
BDO Optimisim Index |
91.58 |
92.30 |
91.36 |
91.43 |
|
BDO Output Index |
97.51 |
97.16 |
96.70 |
97.18 |
|
BDO Inflation Index |
99.10 |
99.59 |
98.73 |
97.45 |
|
BDO Employment Index |
94.22 |
94.32 |
94.11 |
94.32 |
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.
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