Labour Market Report – August 2026
Labour Market Overview
The latest ONS Labour Market Overview shows that:
- UK unemployment rate decreased slightly on the previous quarter to 4.9%, 1.772 million people unemployed.
- Unemployment amongst young people remains high, particularly the youngest age group (aged 16-17 = 30%/ aged 18-24 = 14.6%).
- Employment rate was down slightly at 75.1%, 34.469 million people in employment.
- UK economic inactivity rate was down slightly at 20.9% but 55,000 higher than 12 months ago.
- 111 million people are economically inactive, higher than last year and 484,000 higher than pre-pandemic levels.
- Vacancies decreased on the previous quarter to 707,000, and 19,000 lower than 12 months ago. There were 2.5 unemployed people per vacancy in April to June.
- Payrolled employees for June 2026 was similar at 30.3 million and decreased by 94,000 over the year. 1.24 million higher than pre-pandemic levels.
- Claimant count increased on the month to 1.665 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.
Employment Trends
The KPMG and REC, UK Report on Jobs: North of England cites that permanent staff hiring across the North of England fell for the third month running during August. Recruitment consultancies often linked the decrease in permanent placements to a reduction in job openings. The data marked the fourth successive monthly increase in billings received from the employment of temporary workers across the North of England. The respective seasonally adjusted index ticked up for the fifth month in succession to its highest in just over four years and was consistent with a steep rise in temp workers. In anecdotal evidence, recruiters noted that while clients were busier, they often preferred contract workers when additional staff were required.
Adjusted for seasonal factors, the Permanent Staff Availability Index indicated a further uplift in the number of candidates seeking permanent roles across the North of England in August. The increase in labour supply was driven by redundancies, fewer vacancies and more people seeking new opportunities, according to panel members. The trend of growth in temporary labour supply across the North of England suggested that higher candidate numbers reflected restructuring efforts at firms and a rise in people entering the job market.
The KMPG Report also advises that the areas where there are skills shortages across the region within temporary recruitment is in the following areas:
- CNC Machinist
- FLT Operators
- Forklift Drivers
- HGV Drivers
- Machine Operators
- Mechanical Assemblers
- Welders
GEM Partnership maintains a commitment to training and retraining employees in key operational roles. This is necessary to mitigate the impact of regional labour shortages, support business continuity and ensure the availability of appropriately skilled workers to meet current and future operational requirements. For more information on how we can support your business needs please contact Maria.Miller@gempartnership.com
Government Policy & Research Highlights
The government has published its Analysis to support the public consultation on reforms to zero hours and similar contracts. Monetised estimates suggest the reforms could result in a net annual cost to employers of between £300 million and £1.4 billion. These changes will be particularly important for labour providers and sectors reliant on flexible labour models.
The Fair Work Agency has published their delivery plan for 2026 to 2027, which sets out its first year priorities, including tackling labour exploitation, preparing for NMW and holiday pay enforcement as well as developing digital tools to support compliance.
In an update to the Fair Work Agencies: enforcement policy which was originally published in April, the Fair Work Agency clarifies their enforcement role on modern slavery and worker exploitation and confirms that they will use the Fraud Act for offences that fall short of modern slavery.
The Office for Equality and Opportunity have launched a consultation on reforming the equal pay framework, including proposals to address gaps affecting disabled people, ethnic minority groups and outsourced workers, while making the system work better for workers and employers.
Young People Engagement
A new apprenticeship bursary of up to £4,500 per year per household intends to reduce financial barriers preventing young people from taking up apprenticeships. The bursary targets the small number of Universal Credit families for whom the current system disincentivises apprenticeships. A Social Security Advisory Committee report found single parents with a disabled child could lose up to £340 per week in benefits when a young person started an apprenticeship, exceeding the expected apprenticeship salary of £258 per week. The bursary addresses this shortfall, so that this is no longer a barrier to a young person taking up an apprenticeship.
The Transport Committee has launched an enquiry on Getting to work: transport connecting young people to jobs and training. It will examine how inadequate or unaffordable transport prevents young people from accessing and remaining in employment or training, and the role employers and transport operators can play in reducing these barriers. The inquiry will run until 16th October 2026
UK Immigration Policy
The government has announced an expansion of the Global Talent visa, enabling more than 100 UK companies to support leading international scientists and engineers to live and work in the UK. Commercial research businesses, including AstraZeneca, Added Value Solutions (AVS), Denroy Plastics and Ffilm Cymru, will join approved universities and research institutes in supporting eligible applicants.
The Home Office has published updated data on illegal working and enforcement. Between 1 January and 30 June 2026, Immigration Enforcement carried out 7,270 illegal working visits and made 4,756 arrests. Compared with the same period in 2025, visits increased by 31% and arrests by 20%, representing the highest level of illegal working enforcement activity recorded for the first half of a year. Over this period, more than 1,200 businesses found to be employing people illegally have been issued with a Civil Penalty, which means they face significant fines of over £74 million. In addition, 10 Closure Notices and 55 Alcohol and Late-Night Refreshment Licence reviews have been pursued.
The Migration Observatory’s latest briefing Unauthorised Migration into the UK identifies four main routes to becoming an unauthorised migrant in the UK: overstaying a visa, entering without authorisation, remaining after an unsuccessful asylum claim and appeals, or being born in the UK to unauthorised migrant parents. Around 264,000 unauthorised arrivals were recorded between 2018 and 2025, 73% of whom arrived by small boat. Small boat arrivals fell in the first half of 2026, down 41% compared with the same period in 2025.
The Migration Observatory also reported that a record number of people applied for citizenship in the first half of 2026. In the year ending June 2026, just over 315,000 people applied to become British citizens, the highest number on record. This was up 17% from the previous year. Citizenship applications from both EU and non-EU citizens increased. The largest numbers of applicants came from non-EU countries (234,000 or 74% of all grants): this continues a gradual upward trend over the past five years, as non-EU citizens who entered before 2020 have become eligible for citizenship. Applications from EU citizens increased sharply from October 2025, by contrast, rising by around 40% over the course of a year to reach over 81,000 in the year ending June 2026.
References
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/august2026
https://assets.publishing.service.gov.uk/media/6a7b3720bbafcd1db3b6e432/analytical-covering-note.pdf
https://www.gov.uk/government/publications/fair-work-agency-delivery-plan-for-2026-to-2027/fair-work-agency-delivery-plan-2026-to-2027
https://www.gov.uk/government/publications/fair-work-agency-enforcement-policy-statement/fair-work-agency-enforcement-statement
https://www.gov.uk/government/news/government-orders-that-public-spending-must-back-british-jobs-and-skills-in-every-postcode
https://www.gov.uk/government/consultations/equal-pay-and-pay-discrimination
https://www.gov.uk/government/news/government-invests-in-young-people-with-more-opportunities-close-to-home
https://committees.parliament.uk/work/9931/getting-to-work-transport-connecting-young-people-to-jobs-and-training/
https://www.gov.uk/government/news/global-talent-visa-expanded-to-attract-worlds-brightest-researchers-to-power-british-innovation
https://www.gov.uk/government/publications/returns-from-the-uk-and-illegal-working-activity-since-july-2024/illegal-working-and-enforcement-activity-to-the-end-of-june-2026
https://migrationobservatory.ox.ac.uk/resources/briefings/unauthorised-migration-in-the-uk/
https://migrationobservatory.ox.ac.uk/press/citizenship-applications-hit-new-record-while-asylum-applications-fall/