Joanne Frew, Global Head of Employment & Pensions at DWF, has provided insights on the latest UK labour market statistics.
Joanne Frew says: “Recent labour market data suggests a modest easing in headline conditions, although underlying pressures remain evident. The UK employment rate was estimated at 75% in December 2025 to February 2026. This is down in the latest quarter but largely unchanged compared with estimates of a year ago. The UK unemployment rate was estimated at 4.9% in the same period. This is down in the latest quarter but above estimates of a year ago. In combination, the figures point to a labour market adjusting incrementally rather than shifting sharply.
The estimated number of vacancies in the UK has decreased in the latest quarter. Early estimates for January to March 2026 suggest a decrease of 29,000, to 711,000, compared with October to December 2025. The latest figures point to a more cautious approach to recruitment, as employers reassess workforce needs amid wider economic uncertainty and a changing regulatory environment. Vacancy trends are increasingly being viewed as an early indicator of how employer confidence is evolving in this context.
Annual growth in employees’ average earnings in Great Britain was 3.6% for regular earnings (excluding bonuses) and 3.8% for total earnings (including bonuses) in December 2025 to February 2026. While pay growth is continuing to ease, cost pressures for both employees and employers remain firmly in play. Ongoing geopolitical uncertainty, including the conflict in the Middle East, continues to feed inflation concerns and reinforce employee expectations around pay, at the same time as employers absorb rising costs across their businesses, including the increase in the National Living Wage to £12.71 an hour. This is narrowing the space for pay manoeuvre and is likely to shape a more constrained approach to wage discussions over the remainder of 2026.
The Employment Rights Act 2025 is now moving from policy to practice, with a significant tranche of reforms having come into force in April. As employers begin to adjust to the cumulative impact of these changes, there are early signs of a more cautious approach to workforce planning, shaped by rising operating costs, reduced flexibility and the practical demands of a more complex compliance landscape.”