UK Labour Market Slows Down Amid National Insurance Hike and Wage Increases.

The UK labour market is experiencing a slowdown, with job vacancies and payroll employment declining in recent months. The number of job vacancies dropped by 44,000 between May and July, while payroll employment fell by 26,000 in June. Over the year to June, payroll employment dropped by 149,000, with a further decline of 8,000 in July. Rising labour costs, including national insurance contributions and the minimum wage, have affected employers in sectors such as hospitality and retail.

The UK labour market has shown signs of a slowdown in recent months, with job vacancies and payroll employment declining. According to the Office for National Statistics (ONS), the number of job vacancies fell by 44,000 between May and July, reaching 718,000 [1]. Concurrently, payroll employment dropped by 26,000 in June, with a further decline of 8,000 in July. Over the year to June, payroll employment decreased by 149,000, indicating a persistent cooling trend in the labour market [3].

The hospitality and retail sectors have been particularly affected, with steep drops in employment observed in these industries. Rising labour costs, including increases in national insurance contributions and the minimum wage, have placed significant pressure on employers in these sectors [1, 3]. The Low Pay Commission (LPC) has estimated that the minimum wage for workers aged 21 and over will increase by 4.1% to £12.71 ($16.896) in April 2026, further adding to the financial strain on businesses [2].

The Bank of England (BoE) has been closely monitoring these developments, as it seeks to balance controlling inflation with avoiding a slowdown in the labour market. The BoE recently cut interest rates to 4%, marking its fifth cut in a year, in an attempt to mitigate the impact of rising labour costs on businesses [3].

Domino's Pizza Group, for instance, has seen its forecast for annual core profit fall due to higher labour costs. The company expects underlying core profit to range between £130 million and £140 million for 2025, down from previous estimates of £141 million to £150 million. This has led to a significant drop in the company's shares, with a 20% decline on Tuesday [4].

The UK's labour market is facing considerable challenges, with businesses grappling with higher labour costs and reduced employment opportunities. As the minimum wage and national insurance contributions continue to rise, employers will need to adapt their strategies to remain competitive and profitable.

References:
[1] https://www.bbc.co.uk/news/articles/cpdjjp681p7o
[2] https://www.bloomberg.com/news/articles/2025-08-05/uk-firms-face-4-minimum-wage-rise-in-2026-early-estimates-show
[3] https://uk.finance.yahoo.com/news/uk-job-market-weaken-vacancies-pay-063355271.html
[4] https://www.reuters.com/en/dominos-uk-cuts-profit-forecast-labour-costs-climb-shares-plunge-20-2025-08-05/