Labour Market Report – July 2026
Labour Market Overview
The latest ONS Labour Market Overview shows that:
- UK unemployment rate decreased slightly on the previous quarter to 4.9%, 1.760 million people unemployed.
- Unemployment amongst young people remains high, particularly the youngest age group (aged 16-17 = 29.8%/ aged 18-24 = 14.8%).
- Employment rate was down slightly at similar at 75.1%, 34.475 million people in employment.
- UK economic inactivity rate was down slightly at 20.9% and 26,000 higher than 12 months ago.
- 108 million people are economically inactive, higher than last year and 481,000 higher than pre-pandemic levels.
- Vacancies decreased on the previous quarter to 712,000, 18,000 lower than 12 months ago. There were 2.5 unemployed people per vacancy in March to May 2026.
- Payrolled employees for June 2026 remained at 30.3 million, a decrease of 71,000 over the year and 1.26 million higher than pre-pandemic levels.
- Annual growth for regular pay without bonus was 3.4% and with bonus was 4.3%. Adjusted for inflation, annual growth was 0.3% for regular pay and 1.1% for total pay.
- The claimant count increased on the month to 1.689 million but decreased on the year. This is the measure of those receiving benefit principally due to being unemployed.
- Redundancies were 3.6 per thousand employees, down on the last quarter and down on 12 months ago.
Government Initiatives
The DWP has published an update on the Job and Careers Service outlining how it will put their ambitions into practice for those who use the services, including customers, employers and their staff. Updated guidance has also been published for employers offering Jobcentre Plus work experience placements, alongside further updates on the development of the Jobs and Careers Service. This will enable unemployed people to volunteer for placements lasting between 1 and 8 weeks. Volunteers will be matched with suitable host employers and complete a light touch selection process. The participants will continue to claim benefits along with the costs of travel and childcare if necessary. Host employers cannot pay participants as doing so may affect their benefit entitlement. Participants who have spent up to 8 weeks in a work experience opportunity can have their placement extended by up to 4 weeks where an employer makes an offer to take them on to an apprenticeship.
New digital employment tools have been launched by the Government, which includes a CV Builder, Find a Job service, AI Work Assistant and Action Planning Tool as part of the new improved Find a Job website. The government has also announced a partnership with LinkedIn, enabling anonymised labour market data to be shared with Skills England to improve workforce planning and careers advice.
The Keep Britain Working review reports that the programme has entered its Vanguard phase, which is a 3 year programme seeking to develop the solutions set out in the review by working with employers, providers, regions and wider stakeholders to collaborate, learn, experiment, and prove what works to transform workplace health and inclusion in the UK. With almost 200 employers participating the programme is building a new system that puts earlier workplace support at its heart in order to tackle one of the most urgent workforce challenges facing the country, with 2.8 million people being currently out of work due to long-term sickness.
The Youth Guarantee
The Youth Jobs Grant offers employers £3,000 for each eligible 18–24-year-old recruited who has been out of work for 6 months, with the aim of supporting up to 60,000 young people over the next three years. Nearly 180 new Youth Hubs have been confirmed as part of the expansion to over 360 locations across Great Britain, improving access to employment and support services. From football clubs to colleges and libraries, the hubs bring together local mental health and housing support, skills and training opportunities as well as careers guidance and work opportunities with links to local employers with live job and apprenticeship opportunities
The government has announced the Top Apprenticeship Employers for 2026. The annual Top 100 Apprenticeship Employers and Top 50 SME Apprenticeship Employers for 2026 has been published by the Department for Work and Pensions in partnership with careers site Higherin. The government is boosting the number of apprenticeship opportunities available to young people as a priority, trying to create 50,000 new apprenticeships to build a skilled, motivated workforce that businesses and the economy need.
Employment Trends
KPMG and REC, UK Report on Jobs: North of England reports that recruitment consultancies operating in the North of England signalled a second successive monthly reduction in permanent staff placements in July. According to anecdotal evidence, the fall reflected a drop in job openings and a preference for temp workers amid low business confidence and a reluctance amongst some employers to commit to permanent hires. July data indicated a third successive monthly increase from the engagement of short-term temporary staff across the North of England. The rate of expansion was not only steep, but also the strongest in four years and the most pronounced of the monitored English regions. Surveyed recruiters noted that new projects and, in some cases, stronger order books had lifted billings in the latest survey period.
A further marked improvement in the availability of permanent staff across the North of England was signalled in July. Growth in permanent labour availability was attributed by panellists to fewer work opportunities and job losses, which were linked in turn to company restructuring efforts amid elevated staff costs and challenging market conditions. Amid further reports of redundancies, temporary staff availability increased again across the North of England in July.
UK Immigration Policy
The Home Secretary opened the second reading of the Immigration and Asylum Bill stating that the legislation aims to reduce illegal migration, speed up asylum decisions, support genuine refugees and enable the swift removal of those with no right to remain in the UK.
The Home Office has announced new legislation requiring asylum seekers who are later able to do so to contribute towards the cost of their accommodation and support. Eligible adults will make monthly repayments, up to a total of around £10,000. Migrants will be required to pay off the full amount before being eligible for settlement. Anyone who leaves the UK will be required to make their payments if they wish to return at a future date.
The Migration Advisory Committee (MAC) has urged the Home Office to improve immigration data quality by introducing consistent visa application identifiers, recording sponsor information more effectively and linking Home Office data with HMRC and DWP records.
Commentary
Maria Miller – Operations Director (Maria.Miller@gempartnership.com)
GEM Partnership can support with your temporary and permanent staffing requirements, providing a total workforce solution, which covers both recruitment and retention of the workforce. We would love the opportunity to meet with you and provide a free training needs assessment where we can identify, any gaps in training allowing you to bolster your operations, retain talent, and unlock the potential of your most valuable asset – your employees.
References
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/july2026
https://www.gov.uk/government/publications/get-britain-working-an-update-on-the-jobs-and-careers-service/get-britain-working-an-update-on-the-jobs-and-careers-servicehttps://www.jobs.service.gov.uk/
https://www.gov.uk/government/publications/work-experience-employer-guide/work-experience-employer-guide
https://www.gov.uk/government/news/linkedin-and-government-join-forces-to-help-jobseekers-build-their-careers
https://www.gov.uk/government/publications/keep-britain-working-review-update-march-2026/keep-britain-working-review-march-2026-update
https://www.gov.uk/government/news/keep-britain-working-continues-drive-to-stop-people-falling-out-of-the-workforce
https://www.gov.uk/government/news/funding-for-businesses-who-give-youngsters-a-chance-as-government-ramps-up-youth-jobs-drive
https://www.gov.uk/government/news/almost-180-more-youth-hubs-to-help-young-people-build-skills-and-find-jobs
https://www.top-apprenticeshipemployers.co.uk/2026-winners
https://www.gov.uk/government/news/bae-systems-tops-the-dwps-latest-apprenticeships-rankings-as-leading-employers-named
https://kpmg.com/uk/en/media/press-releases/2026/08/kpmg-and-rec-uk-report-on-jobs.html
https://www.gov.uk/government/speeches/immigration-and-asylum-bill-second-reading-opening-speech
https://www.gov.uk/government/news/asylum-seekers-will-pay-towards-costs-of-accommodation
https://www.gov.uk/government/publications/letter-to-the-home-secretary-on-data-access