Labour Market Report – May 2025
Labour Market Overview
The latest ONS Labour Market Overview shows that:
The CIPD has published its latest quarterly Labour Market Outlook. Key findings:
- The net employment balance fell again to its lowest level outside of the pandemic.
- Fewer employers are expecting to grow their workforce in the next three months
- Confidence has dropped across all sectors
- One in four employers are planning redundancies
- Half of employers enhanced their redundancy pay
- Basic pay rises expected to remain at 3%
The British Retail Consortium latest survey of leading retailers HR Directors reveals the scale of concern about the Employment Rights Bill. Key findings:
- 70% said it would have a negative impact on their business
- 52% suggested it would result in a reduction in staff numbers
- 61% said the Bill would reduce flexibility in job offerings
- Biggest concern was the right to guaranteed hours which risks making it harder to offer part-time jobs
The International Monetary Fund (IMF) latest World Economic Outlook Update examines the rise of the ‘silver economy’ and urges government to implement policies which increase labour force participation among older individuals. Stating that “the 70s are the new 50s”, the IMF highlighted its findings that, on average, a person who was 70 in 2022 had the same cognitive ability as a 53-year-old in 2000. Physical strength also improved, with the frailty of a 70-year-old in 2022 corresponding with a person who was 56 in 2000.
The British Chamber of Commerce (BCC) is warning of a lost generation unless the government tackles the jobs crisis among young people. A new report Creating Job Opportunities for Gen Z found that only 13% of business currently have specific recruitment, training or retention plans for under 25s. BCC is calling on the government to invest in support to help young people and support SMEs to take on and train young people. Gem Partnership offer a number of route ways for training young people into work, including an expansive apprenticeship offering providing training for the individual and building skills within the workforce, for more information on this contact Kelly.lee@gempartnership.com
Employment Trends
The KPMG and REC, UK Report on Jobs: North of England highlighted that the number of people placed into permanent roles across the North of England decreased further in May, stretching the current period of reduction to nearly two years. Panellists noted lower demand for staff, in part due to restructuring and a lack of suitably skilled candidates as reasons behind the latest reduction.
Salaries awarded to new permanent joiners increased for a second straight month in May. The increase reflected greater competition for skilled staff and attempts to attract sought-after candidates, recruiters noted.
The rate of salary inflation was the strongest in the year-to-date and solid overall. However, steeper increases in starting salaries were recorded in London and the Midlands. As a result, the upturn in the North of England was softer than the UK average.
Average hourly rates of pay for short-term staff in the North of England rose again in May, thereby extending the current sequence of wage growth to one-and-a-half years. The rate of inflation was sharp and the strongest in nearly a year. Qualitative evidence highlighted that employers had increased pay due to recent and stronger than average rises in the National Minimum and Living Wages rates. The North of England recorded the most pronounced upturn in temp pay of all four monitored English regions.
Artificial Intelligence
ACAS commissioned YouGov to complete an online poll of 1,023 employees in a representative sample of British businesses. The participants were asked: what is your biggest concern about the use of AI at your workplace? The results included:
- 1 in 4 Workers worry that AI will lead to job losses
- 17% were worried about AI making errors
- 15% were concerned about the lack of regulation
Forbes has reported in an article on UK Artificial Intelligence (AI) Statistics And Trends In 2025, that the AI growth and adoption in the UK:
- The UK AI market is worth more than £21 billion, according to the US International Trade Administration, and is expected to grow to £1 trillion by 2035
- The number of UK AI companies has increased by over 600% over the last 10 years
- Around one in six UK organisations, totalling 432,000, have embraced at least one AI technology – according to government research
- 68% of large companies, 33% of medium-sized companies, and 15% of small companies have incorporated at least one AI technology
- Following a 10-week trial of computer vision technology, Marks & Spencer reported an 80% reduction in warehouse accidents
- Government data shows the most commonly adopted AI solutions in the UK focus on:
- data management and analysis (9%)
- natural language processing and generation (8%)
- machine learning (7%)
- AI hardware (5%)
- computer vision and image processing and generation (5%).
- The IT and telecommunications sector has the highest AI adoption rate at 29.5%, closely followed by the legal sector at 29.2% The hospitality, health, and retail sectors have the lowest adoption rates, at around 11.5%.
Impact on economy and jobs
- The UK has an AI workforce of over 360,000
- AI contributed £3.7 billion to the economy in 2022
- Britain has twice the number of AI-based companies than any European nation
Policy and Regional Development
The government recently announced in the policy paper ‘Tackling tax non-compliance: umbrella company market’ that from April 2026, it will make agencies responsible for accounting for PAYE when providing workers employed through umbrella companies. The government is also taking action through the Employment Rights Bill to bring umbrella companies within scope of the legal definition of an employment business, this will bring Umbrella companies within scope of the Employment Agencies Act 1973. Gem believe this is a positive step to reduce non – compliance within the sector.
The Low Pay Commission (LPC) has launched its annual consultation to gather evidence on the National Minimum Wage (NMW) and National Living Wage (NLW) rates to apply from April 2026. The LPC is inviting responses from employers, workers, representative bodies, experts and the public. Evidence is sought on the affordability, impact, and wider labour market effects of minimum wage increases – particularly the April 2025 rise that brought the NLW to £12.21 for workers aged 21 and over, and the potential implications of further increases in 2026 to between £12.50 and £12.80. Although the Government has not yet confirmed the LPC’s formal remit for 2026, the Commission has decided to proceed with the consultation to give stakeholders maximum time to contribute. An updated version may be published once the remit is confirmed.
The consultation also seeks input on:
- The impact of the April 2025 NLW increase on workers, employers and the wider economy.
- The effects of minimum wage increases for younger workers on their job prospects.
- Views on how to lower the age threshold for the NLW to include 18-20-year-olds, including the pace and method of implementation.
- The potential for future increases to the 16–17-year-old and Apprentice rates.
How to respond:
Stakeholders are encouraged to submit evidence via the LPC’s online consultation platform or by email to lpc@lowpay.gov.uk. Respondents can focus only on the questions most relevant to them and are not expected to answer every question. In addition to written evidence, the LPC is conducting regional visits and virtual meetings to hear first-hand from organisations and individuals across the UK. Those interested in meeting with the Commission can express their interest by email.
Health and Wellbeing
ADP Research latest People at Work Report 2025 is a global survey reaching out to 38,000 people in 34 markets. Key findings for the UK:
- 21% of workers are fully engaged, an increase of 3% on the previous year
- 57% of workers say they are rattled with 20% feeling overloaded
- Only 24% of workers felt they were thriving
- 28% felt they were judged for taking advantage of flexible working arrangements
- 68% said they had low workplace stress
- 47% said they had two jobs to cover necessary expenses
- 15% of workers said they had experienced discrimination, an increase of 5% on the previous year
The government has announced that the Menopause Employment Ambassador, Mariella Frostrup, is to work with industry leaders on how employers can support women with menopause in the workplace. There has also been an independent “Menopause advisory group” launched to support employers on steps they can take to help women to stay in work. This comes as part of wider government drive to break down barriers to work to unlock growth as part of the Plan for Change.
Immigration Policy
The Prime Minister has announced new plans to end uncontrolled immigration. Migrants that come to the UK will now have to earn the right to stay in the country:
- Migration system will back British workers, boost economic growth and control our borders under the Plan for Change
- New contributions-based model will extend the route to settlement from five to ten years – with reductions for those that contribute to the economy
- New English language requirements across all immigration routes to promote integration
- The Immigration White Paper has now been published.
The Home Office has published the latest visa application data which provides statistics on the numbers of people with the intention to enter the UK for work, study and family reasons. In April 2025 there were:
- 4,100 applications for Health and care worker visa
- 3,500 for Skilled worker visa
- 4,000 for Skilled worker dependent visa
There were 22,100 applications for the Youth Mobility Scheme visas in the year ending April 2025, 11% decrease on the previous year. There were 39,200 applications for the Seasonal Worker visa in the year ending April 2025, a 4% increase on the previous year.
The Migration Observatory reports of the UK’s Asylum backlog. The UK has accumulated a large backlog of asylum cases. At the end of 2024 it stood at 91,000 applications, 31% lower than the peak in 2022. Only 22% of people who applied for asylum in the second quarter of 2024 received an initial decision within 6 months, down from 87% a decade before.
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/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/may2025
https://www.cipd.org/contentassets/cf73843a106949d9b16ac2bc9b526278/8869-lmo-spring-2025-web.pdf
https://brc.org.uk/news-and-events/news/corporate-affairs/2025/ungated/employment-rights-bill-putting-brakes-on-hiring/
https://www.forbes.com/uk/advisor/business/software/uk-artificial-intelligence-ai-statistics/
https://www.acas.org.uk/1-in-4-workers-worry-that-ai-will-lead-to-job-losses
https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025
https://www.gov.uk/government/news/thousands-of-uk-jobseekers-helped-into-workplace-training
https://www.gov.uk/government/publications/tackling-tax-non-compliance-umbrella-company-market
https://www.gov.uk/guidance/responsibilities-for-employment-businesses-working-with-umbrella-companies
https://www.gov.uk/government/consultations/low-pay-commission-consultation-2025/low-pay-commission-consultation-letter#:~:text=National%20Living%20Wage,-On%201%20April&text=To%20maintain%20the%20NLW%20at,these%20figures%20will%20likely%20increase.
https://uk.adp.com/resources/insights/people-at-work.aspx
https://www.gov.uk/government/news/menopause-employment-ambassador-partners-with-industry-leaders-to-support-women-to-stay-in-work#:~:text=Menopause%20Employment%20Ambassador%2C%20Mariella%20Frostrup,women%20to%20stay%20in%20work.
https://www.breathehr.com/en-gb/resources/holiday-burnout-report-2024
https://www.gov.uk/government/news/prime-minister-unveils-new-plan-to-end-years-of-uncontrolled-migration
https://migrationobservatory.ox.ac.uk/resources/briefings/the-uks-asylum-backlog/
https://www.nationalcrimeagency.gov.uk/news/operation-machinize-hundreds-of-barbershops-targeted-in-nca-coordinated-crackdown#:~:text=%E2%80%9COperation%20Machinize%20targeted%20barbershops%20and,criminality%2C%20all%20across%20the%20country.