Omni Research – UK Resourcing – Market Insight – Winter 2024/ 25

The UK labour market is at a pivotal moment. Data from the ONS and CIPD highlights growing uncertainty, with recruitment slowing, redundancies rising, and skills shortages persisting in key sectors. While employment levels remain stable, businesses are approaching workforce planning with increased caution.

At Omni, we know people are the key to business success. However, with the second-largest quarterly decline in net employment balance since the pandemic and record-high redundancy plans outside of COVID-19, organisations must take a more strategic approach. Short-term cost-cutting must be balanced with long-term talent sustainability.

One of the most concerning trends is the planned reduction in training investment by nearly one in five businesses. With industries like construction, education, and STEM already facing critical skills shortages, cutting training risks widening these gaps. Instead, businesses should focus on upskilling, workforce mobility, and automation.

Despite the challenges, opportunities remain. Hard-to-fill vacancies persist, and companies investing in their people – through training, upskilling, and strong employee value propositions – will be best positioned for success.

Omni remains committed to helping businesses build resilient, agile, and skilled workforces. This report provides essential insights to navigate the evolving labour market.

Redundancies are on the rise, with one in four employers planning job cuts in the next three months – the highest rate recorded in a decade, excluding the pandemic. This marks an increase from 21% last quarter. The private sector has seen redundancies climb from 22% to 27%, while the public sector has risen from 20% to 23%. Voluntary sector redundancies have also increased, jumping from 14% to 20%.

According to the ONS, the number of people reporting redundancy in the three months before being surveyed has decreased over the year but saw a recent uptick, reaching 3.9 per thousand employees between October and December 2024. These figures highlight growing uncertainty in the labour market, with businesses prioritising cost management over workforce expansion.

The UK job market continues to experience a decline in vacancies, with ONS data showing a reduction of 9,000 in the last quarter, bringing the total to 819,000 between November 2024 and January 2025. This marks the 31st consecutive period of decline, with vacancies now 110,000 (11.8%) lower than a year ago. The ratio of unemployed people per vacancy has increased slightly to 1.9, reflecting a more competitive job market.

Despite this overall decline, the CIPD reports that a third (33%) of employers still faced hard-to-fill vacancies last quarter, down from 38% a year ago. Skills shortages remain particularly pronounced in certain sectors, with 49% of employers in compulsory education, 46% in construction, 43% in professional, scientific, and technical fields, and 42% in transport and storage struggling to fill roles. The public sector (45%) continues to face greater recruitment challenges than the private sector (31%). These figures highlight the ongoing need for strategic workforce planning and targeted talent attraction strategies.

Wage growth in the UK remains strong, but future pay expectations indicate signs of moderation. According to the ONS, annual growth in average regular earnings (excluding bonuses) was 5.9% between October and December 2024. In real terms, adjusted for inflation, regular and total pay rose by 2.5% using CPIH and 3.4% using CPI. The private sector saw 6.2% wage growth, compared to 4.7% in the public sector. Among industries, wholesaling, retail, hotels, and restaurants recorded the highest growth at 6.6%, followed closely by construction at 6.5%.

The CIPD reports that while median expected basic pay increases remain at 3%, there is a decline in public sector pay expectations, dropping from 4% last quarter to 2.5%. Private sector expectations remain steady at 3%, with similar forecasts for SMEs and larger organisations. These figures highlight a stabilisation in pay growth as businesses manage economic uncertainty and rising costs.

The latest CIPD data highlights the significant cost pressures facing businesses as National Insurance and National Living Wage increases take effect in April. To offset rising employment costs, 42% of employers plan to raise prices, while 37% aim to improve efficiency and boost productivity. However, these financial strains are also impacting hiring and workforce planning, with 32% of employers expecting to reduce staff through redundancies or lower recruitment levels.

Many businesses are looking to cut costs by reducing overtime and bonuses (23%) or decreasing staff working hours (14%), particularly in hospitality (46%). One in four (24%) employers are scaling back business investment and expansion plans, with SMEs in the private sector (29%) being the most affected. Additionally, 21% of employers plan to slow basic pay growth, and 16% intend to reduce other reward package elements.

The financial pressures are also impacting training budgets, with 19% of firms planning cuts despite its known benefits for productivity and skills development. In response to cost challenges, some industries are turning to automation, with 31% of construction firms and 34% of manufacturers planning to increase automation, while 30% and 19%, respectively, aim to recruit more apprentices.