Labour Market Report – February 2026
Labour Market Overview
The latest ONS Labour Market Overview shows that:
The National Institute of Economic and Social Research expects unemployment to peak at 5.4% in the second half of 2026 before easing towards its long-term rate of around 5%.
Lewis Silkin’s Future @Work 2026:Building for future readiness report examines how organisations are responding to economic uncertainty and structural labour market change. While 62% expect headcount growth and 64% anticipate rising demand for soft skills, 74% report investing more in technology than workforce development. The main barriers to recruitment and retention are:
- Immigration limits or restrictions (30%)
- Gaps in practical experience or job-ready skills (27%)
- High cost of living and lack of affordable housing (25%)
These findings highlight growing tension between technology investment and workforce capability, alongside persistent structural constraints on labour supply.
Government Policy
The Department for Business and Trade have announced the appointment of Lisa Pinney MBE as the incoming Fair Work Agency CEO. Lisa will begin her role at the Fair Work Agency from April, bringing together three existing enforcement bodies to create a single agency which ends the current fragmented system of employment rights enforcement.
The Department for Business and Trade (DBT) has launched a new website providing guidance on the Employment Rights Act 2025 which includes clear timelines, a summary of key changes and actions to take, and links to additional guidance.
Apprenticeships
Fast track reforms to the Apprenticeship Scheme have been announced, allowing new or updated training courses to be developed in as little as three months. This forms part of the Growth and Skills Levy reforms, backed by £725 million funding which aims to deliver 50,000 additional apprenticeships for young people.
AI
Free AI training is open to all UK adults online, aimed at giving people the skills needed to use simple AI tools effectively in the workplace has been expanded by government to upskill 10 million people, with new partners including NHS and techUK. Taking as little as under 20 minutes, the courses will give people the skills needed to use simple AI tools effectively in the workplace and teach the use of AI for tasks like drafting text, creating content and completing administrative tasks, to free up time to focus on other work. This training will give both workers and employers confidence in their new skills, and set standards for what good AI upskilling looks like
Employment Trends
The KPMG and REC, UK Report on Jobs: North of England has reported a renewed increase in permanent staff appointments in February, thereby ending a 31-month period of decline. Panellists linked the upturn to improved demand for staff, particularly in sectors such as technology, finance, construction and HR, as well as reduced constraints on hiring budgets. February survey data pointed to a fourth consecutive monthly fall in billings received from the employment of temp staff in the North of England. Where a decrease was recorded, respondents often blamed challenging economic conditions. Having softened noticeably since January, the rate of contraction was the least pronounced in the current four-month sequence and only modest.
For the first time in 16 months, there was an increase in job openings for both permanent and temporary staff in the North of England in February. The North was the only monitored English area to see improvements in staff demand with the demand for permanent workers increased at a moderate pace that was the strongest since June 2024.
UK Immigration Policy
The Home Office continues to report declines in the number of work-related visas issued. Health and Care Worker visa applications fell to 2,600 in January 2026, down from 18,300 in 2023. Skilled Worker visas declined to 2,100, while Youth Mobility Scheme applications fell by 12% year-on-year.
The Home Secretary has announced the expansion of the Hong Kong British Overseas National route to adult children of BN(O) status holders who were under 18 at the time of Hong Kong’s 1997 handover to China. Their partners and children will also be able to move to the UK under the expanded route. It is estimated 26,000 people will arrive in the UK over the next 5 years.
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/february2026
https://niesr.ac.uk/wp-content/uploads/2026/02/UK-Economic-Outlook-Winter-2026.pdf
https://www.lewissilkin.com/our-thinking/future-of-work-hub/newsletters/2026/02/25/february-2026-future-at-work-2026-report-ais-labour-market-impact-reshaping-early-careers
https://www.gov.uk/government/news/britains-growth-sectors-to-get-major-skills-boost-from-new-fast-track-apprenticeships-reforms
AI Skills Boost – AI Skills Hub
https://www.gov.uk/government/statistics/monthly-entry-clearance-visa-applications-january-2026/monthly-entry-clearance-visa-applications-january-2026
https://www.gov.uk/government/news/hong-kongers-offered-new-lives-as-uk-expands-safe-and-legal-routes
https://www.business.gov.uk/campaign/employment-changes/