UK Jobs Market Weakens Amid Tax and Wage Hikes

The UK’s labor market deteriorated in early 2025, with payrolls dropping 47,000 in March and 33,000 in April, per the Office for National Statistics. Job vacancies fell by 42,000 to 761,000 in February–April, reflecting employer caution after April’s National Insurance contribution hike and National Living Wage increase. Unemployment rose to 4.5% from 4.4% in January–March, though low survey response rates cloud accuracy. Regular earnings grew 5.6% annually, outpacing inflation but slowing from prior months. ONS’s Liz McKeown noted a cooling market, with firms cutting headcount due to higher taxes and wages. A separate survey showed employer hiring intentions at a non-pandemic low. Capital Economics’ Ruth Gregory said wage growth, though strong, may keep the Bank of England cautious on rate cuts after last week’s reduction. Governor Andrew Bailey signaled gradual cuts, wary of inflationary pressures from wages. Aberdeen’s Luke Bartholomew saw no immediate collapse but noted tax impacts. The Bank aims to balance growth and inflation, but persistent wage growth could delay further easing, leaving businesses and workers navigating a challenging economic landscape.