Insights ¦ Labour Market Outlook Winter 2024–25

Key Take Aways

1. Employer confidence is at its lowest outside of pandemic conditions, impacting strategic workforce planning.

2. The net employment balance has suffered its steepest quarterly decline since 2014, signalling increased caution among employers.

3. One in four organisations plans to make redundancies in the next three months, a level rarely seen outside the pandemic period.

4. Confidence across sectors is waning, with private sector net employment expectations falling sharply from +24 to +16.

5. Labour market mobility is slowing, with a downward trend in organisations expecting to increase staff levels.

6. Recruitment intentions have dipped across all sectors, with the private sector now at 61%, reflecting tighter labour supply.

7. Hard-to-fill vacancies remain high, especially in education (49%) and construction (46%), indicating persistent skills shortages.

8. Public sector organisations are increasingly benefiting from increased government investment, aiming to ease recruitment and retention difficulties.

9. The expected median pay increase remains steady at 3%, but actual disposable income is under pressure with inflation at 3.5% (CPIH).

10. Larger private organisations and SMEs show an increased likelihood of reducing workforce numbers due to rising employment costs.

11. Budget measures, including increased NICs and business rate adjustments, are anticipated to significantly push up organisational costs.

12. Organisations are prioritising investments in automation and productivity tools to mitigate rising labour costs, while reducing training budgets and expansion plans.

Key Statistics

• Net employment balance decreased from +21 to +13 this quarter.

• 25% of employers plan redundancies in the next three months, up from 21% last quarter.

• Private sector confidence declined from +24 to +16; voluntary sector from +21 to +6.

• 64% of employers plan to recruit within the upcoming quarter, down from 67% previously.

• 49% of compulsory education and 46% of construction organisations face hard-to-fill vacancies.

• 17% of employers anticipate significant recruitment difficulties over the next six months.

• The median pay award expectation remains at 3%, with public sector pay growth forecast at 2.5%.

• 43% of organisations expect increased employment costs due to the Autumn Budget measures.

• 42% of impacted employers plan to raise prices; 32% plan redundancies or reduced recruitment.

• The increase in NICs from 13.8% to 15% is expected to notably escalate organisational costs.

• 58% of public sector employers believe increased government funding will improve recruitment and retention.

• The CPIH inflation rate stands at 3.5%, exceeding the median pay increase forecast.

Key Discussion Points

• The significant decline in employer confidence signals a cautious outlook amid heightened economic uncertainty.

• Labour market dynamics are shifting with increased redundancies, subdued recruitment, and skills shortages in core sectors.

• The impact of fiscal policy, notably the Autumn Budget 2024, is driving up employment costs and prompting strategic realignment.

• Public sector organisations anticipate that increased investment will support recruitment and retention solutions over the medium term.

• Rising employment costs are leading organisations to consider automation, productivity enhancements, and workforce reductions.

• The stable pay increase expectation at 3% raises concerns given inflation surpassing this rate, affecting real earnings and spending power.

• The sectoral divergence in vacancy fill rates highlights persistent skills gaps and talent shortages in education and construction.

• Organisation responses to cost pressures include pricing strategies, operational efficiencies, and capex reductions, influencing demand dynamics.

• SMEs are particularly vulnerable, with plans to cancel or scale down investment and training programmes impacting long-term talent development.

• The evidence suggests a degree of labour market rigidity, with limited flexibility for pay increases and high barriers to filling vacancies.

• Employer sentiment indicates an increased focus on efficiency and automation as short-term mitigation strategies.

• The evolving policy landscape underscores the importance of proactive workforce planning and investment in employee capabilities for resilience.

Document Description

This article presents the Winter 2024–25 edition of the CIPD Labour Market Outlook, providing a comprehensive analysis of UK employer sentiment, recruitment patterns, redundancy intentions, and pay forecasts. Based on a survey of over 2,000 senior HR professionals and decision-makers, it combines data insights with strategic recommendations. The report highlights the impact of fiscal policies, cost pressures, and labour market tightness on organisational planning, offering critical guidance for senior managers navigating economic and workforce volatility.