Labour Market Report – August 2025
Labour Market Overview
The latest ONS Labour Market Overview shows that:
The Low Pay Commission estimates the April 2026 National Living Wage will be £12.71 per hour (range £12.55–£12.86), a 4.1% rise from the current rate. The actual rate will be impacted by the median pay rate within the UK at the time of confirmation with the final recommendation expected to be submitted to government by the end of October.
The Employer Skills Survey from the Department for Education and Skills England shows 17% of employers had vacancies in 2024 (down from 2022), 6% had skill-shortage vacancies, and 12% reported skills gaps. Employers spent a total of £53bn on training in the past year – an average of £1,700 per employee.
The Chartered Institute of Personnel and Development (CIPD) reports that technological change, the green transition, and an ageing workforce are reshaping UK jobs, yet lifelong learning remains uneven, with older, lower-income, and less-qualified workers least likely to take part. Key findings included:
- Employment among 50–64‑year‑olds in England has soared by 40% over the past 20 years, nearly tripling the overall employment growth rate of 14%. Meanwhile, the number of younger workers (aged 16–24) has dropped by 13%.
- Only 47% of workers aged 55 and over feel their current role provides strong skills development—compared to 73% of workers aged 18–24.
- 37% of older workers believe they have skills suitable for more demanding roles, yet just 24% feel their job offers good prospects for advancement, versus 59% of younger workers.
- Employer training investment has declined markedly: the average spend per trainee has fallen 27% over the past decade, from £4,095 in 2011 to £2,971 in 2022, and public funding for adult learning has dropped 31% in real terms since its 2003–04 peak.
New CIPD research shows over one million workers – mainly younger workers – left jobs last year due to a lack of flexibility. The IPPR warns that fewer than half of 18-24 year olds feel prepared for work, and two in five have never undertaken work experience, risking deeper inequality. The think tank warned that this lack of preparation and the increasing number of young people not in education, employment or training (NEET) could lead to deepening inequality and hamper social mobility.
In order to address these issues the government have launched 8 month foundation apprenticeships, which are employed positions that are for younger people age 16 to 21 who will benefit from a wide range of experiences. Each foundation occupation provides a mix of employability skills and behaviours, technical knowledge and skills, and associated English and maths. It combines valuable hands-on practice in the workplace with off-the-job learning. Completion of this foundation apprenticeship will certify competency in all of the technical knowledge and skills, together with all of the employability skills and behaviours described. The typical progression routes will likely include employment or progression onto another skills product such as a level 2 or level 3 apprenticeship. Foundation apprenticeships benefit employers as they get to see the apprentice in work-based settings while the apprentice receives extra support. Employers also benefit from accessing a broader talent pool of young learners than they might otherwise do generating new talent for the future.
On the 1st August GEM Partnership launched a brand new Foundation Engineering and Manufacturing Apprenticeship. This shorter more focused apprenticeship addresses the skills barriers that most advanced manufacturing businesses are facing is going to be a very popular offering to upskill your entry level workforce and recruiting talent into or upskill within the business. To help support attracting and retaining talent, the government are offering employer incentives of up to £3000 to the end employer:
- To take on a 16 – 18 years apprentices employers receive a £1000 incentive paid at £500 at 90 days and 242 days if the apprentice is still on programme
- Additional employer recruit and retain incentive of £2000 per foundation apprentice, paid in 3 instalments of £667 at 90 days, £667 at 242 days and £666 payable if the apprentice starts a new apprenticeship within 6 months of their completion date and remains with the same employer.
The Foundation Engineering and Manufacturing Apprenticeship is aimed at general engineering and manufacturing operatives that are found in environments supporting, for example, production, maintenance, assembly of components and systems, machining operations, fabrication and welding and additive manufacturing functions. They may work across many sectors including automotive, aerospace, energy, advanced and general manufacturing. The apprentice will carry out general engineering and manufacturing tasks consistently using safe working practices, planning and organising resources, and completing tasks within timeframes.
If you would like any more information about this new and exciting apprenticeship, please contact Kelly.lee@gempartnership.com
Employment Trends
The KPMG and REC, UK Report on Jobs: North of England shows that their July survey data signalled a further drop in permanent placements across the North of England, thereby stretching the current period of decline to just over two years. Anecdotal evidence indicated that the latest reduction was due to lower demand for permanent staff and recruitment budget constraints. Recruitment consultancies in the North of England also registered a ninth consecutive monthly decrease in billings for temp staff in July. Panellists advised that the fall was reflective of tighter client budgets. However in our experience it is not uncommon to notice a decline in labour movement over the summer months
The seasonally adjusted Permanent Salaries Index posted above the crucial 50.0 mark again in July, to signal a fourth consecutive monthly rise in starting salaries across the North of England. Panellists mentioned that pay had increased to attract and secure sought-after skills. After falling modestly in June, temp pay in the North of England increased in July. Although the rate of wage growth was below trend and only modest overall, it was stronger than the UK-wide average. According to anecdotal evidence, average hourly rates of pay for temporary staff were raised as a result of increased competition for suitably-skilled workers.
Update from HMRC
The HMRC are writing to businesses to highlight the risks of having mini umbrella companies (MUCs) in their labour supply chains. MUCs have been set up as part of a contrived labour supply chain, to exploit government incentives aimed at legitimate, small businesses. This is still an ongoing practice for some businesses, however GEM Partnership only operate on a PAYE model.
MUC fraud is not limited to any one trade sector. It can happen in any supply chain that uses temporary labour. The HMRC are advising that all businesses make sure that there are no MUCs involved when engaging workers and businesses follow the following steps:
- Please review your labour outsourcing arrangements and identify any MUCs. They are often low down in the supply chain.
- Take action to remove the MUCs from your supply chain.
- Be vigilant when outsourcing your temporary labour in the future. A good starting point is to do regular due diligence checks.
On 17 July 2025, in the case of Elphysic Ltd & Ors v HMRC, an Upper Tier Tribunal decided that abusing the VAT Flat Rate scheme and Employment Allowance was fraudulent, and that these MUCs were not entitled to the reliefs. The decision on the MUC abuse of the VAT Flat Rate scheme and Employment Allowance can be accessed on the Case Law National Archives website.
UK Immigration Policy
The Immigration Advice Authority (IAA) has issued a factsheet outlining the proposed changes in the Border Security, Asylum and Immigration Bill 2025, including new powers for the IAA and their implications for advisers, organisations, and clients. The Bill has been amended to create a new UK-wide criminal offence that will target online content that promotes illegal migration, including ads for Channel journeys, fake documents and illegal work.
The Home Office has published a useful new resource listing details of immigration policy changes with a timeline all the way back to 1983, supporting interested parties to see the impact of legislative change on immigration statistics. The Government will invest £100m in recruiting 300 more National Crime Agency officers and upgrading technology to target criminal networks involved in illegal Channel crossings.
Immigration statistics for the year ending June 2025 show that migration to the UK for both employment and education fell but remain significantly higher than before the pandemic. Data published by the Home Office shows:
- 182,553 work visas were granted to main applicants, down 36% on the previous year.
- Visas for carers and home care workers dropped by 88% to 7,378, while grants for nurses fell by 80% to 3,080.Despite this, the overall number of work visas issued remains 33% higher than in 2019, with demand for overseas labour still strong in some sectors
- 414,000 sponsored study visas granted to foreign students in the year ending June 2025, 4% fewer than in the year ending June 2024, but 54% more than in 2019
- Visas issued to dependants of students were 81% lower at 18,000 compared to the year ending June 2024
- Extensions of stay on work routes increased by almost a quarter, with the Graduate route up 24% Dependents saw an even sharper rise of 34%, suggesting that while new applications have slowed, many existing visa holders are choosing to remain in the UK.
Commentary
Maria Miller – Operations Director (Maria.Miller@gempartnership.com)
GEM are looking forward to working with our clients advising on all forthcoming changes initiated from the Employment Rights Bill and associated policy changes, impacting our industry sector. As a training provider we are also working with all relevant governing bodies to stay at the forefront of changes by Skills England. GEM hold direct funding and are able to support with a range of upskilling and staff development programmes to aid your workforce development.
I would welcome the opportunity to discuss the changing landscape with you and outline the support and programmes we offer that can enhance your People plans.
References
https://www.ons.gov.uk/releases/uklabourmarketaugust2025
https://explore-education-statistics.service.gov.uk/find-statistics/employer-skills-survey/2024
https://www.cipd.org/globalassets/media/knowledge/knowledge-hub/reports/2025-pdfs/8930-lifelong-learning-in-the-reskilling-era-report-web.pdfhttps://www.cipd.org/uk/about/press-releases/over-million-changed-jobs-over-lack-of-flexibility-cipd-research/
https://www.ippr.org/media-office/half-of-young-people-leave-school-unprepared-for-work-new-research-finds#:~:text=New%20research%20from%20the%20think,never%20completed%20any%20work%20experience.
https://www.gov.uk/government/publications/border-security-asylum-and-immigration-bill-iaa-factsheet/border-security-asylum-and-immigration-bill-iaa-factsheet
https://www.gov.uk/government/news/major-law-change-to-criminalise-small-boat-smuggler-ads
https://www.gov.uk/government/publications/policy-and-legislative-changes-affecting-migration-to-the-uk-timeline
https://www.gov.uk/government/news/investment-for-border-security-command-paves-way-for-new-crackdown-on-people-smuggling-gangs
https://www.gov.uk/government/statistics/immigration-system-statistics-year-ending-june-2025/summary-of-latest-statistics$