UK vacancies drop to five-year low as smaller employers scale back hiring

Smaller UK businesses are pulling back on recruitment, driving the sharpest drop in job vacancies so far this year, according to official figures reported by BBC News. The Office for National Statistics (ONS) said vacancies fell by 21,000 to 691,000 in the three months to September, the lowest level in more than five years.

Labour costs weigh on small firms

The ONS said the decline was concentrated mainly among smaller employers, which pointed to higher labour costs as a key reason for hiring less. Businesses have said that increases in National Insurance and the minimum wage have raised the cost of employing staff, while energy costs have also climbed since the Iran war began. Construction recorded the largest decrease in openings.

Despite weaker hiring, other measures moved in a more positive direction. The unemployment rate fell to 4.7% in the three months to August, its lowest in more than a year, and the employment rate edged up. Regular pay excluding bonuses grew 3.7%, up from 3.5%, equal to real-terms growth of 0.8% once inflation is considered. The ONS described the overall picture as "broadly flat".

Mixed reactions

The government said the data showed a resilient labour market, though it acknowledged that too many young people remain out of work. Unemployment among 16 to 24-year-olds stood at 15.6% in the June to August quarter, lower than earlier in the year but above the 14.6% recorded a year before. The Conservatives argued that employers cannot afford to take on staff because of taxes and regulation.

Economists noted early signs of recovery but cautioned that slowly easing energy costs could keep recruitment subdued. The ONS also said response rates to its Labour Force Survey have improved, although some volatility remains in the figures. The data is the last official labour market snapshot before the Chancellor's first Budget, due next week.

What it means for businesses

For business owners and managers, the figures highlight how rising employment costs are shaping decisions, particularly at smaller firms with tighter margins. Companies planning recruitment may face a less crowded market for candidates, while those watching costs will be paying close attention to any tax or wage changes announced in the coming Budget.