The UK job market just saw its biggest drop since Covid

The UK job market looked a little like 2020 again last month.

According to the Office for National Statistics, the number of payrolled workers dropped by 78,000 in March — the steepest monthly fall in almost five years, when Brits were coming to terms with the first national lockdown and businesses were working out what that meant for the world of work. At the same time, job vacancies also slipped to a four-year low in the first three months of the year, while a separate recruiter survey shows the number of job seekers is growing at its fastest pace since December 2020. 

The decline in March arrived right before two major cost hikes for businesses, with a £25 billion rise in National Insurance contributions and a 6.7% national minimum wage increase both kicking in this month. The measures were announced in October as part of Labour Chancellor Rachel Reeves’ autumn budget.

Downsizing

Faced with those higher costs, companies clearly chose to shrink head counts, freeze hiring, or both, ahead of time — especially in labor-heavy and lower-wage industries like hospitality and retail. In a February survey, more than two-thirds of hospitality businesses said they planned to reduce staffing due to tax changes, while big-name retailers, including Tesco, Boots, and M&S, also warned of potential job cuts and higher prices. 

Elsewhere, however, wages have actually been looking pretty strong, rising 5.9% in the three months to February compared with the same period in 2024. But some economists expect that to cool later this year, as rising labor costs weigh on employers. And with tariff uncertainty looming larger in the global economy, companies may become even more cautious about hiring.

Interestingly, Americans are increasingly looking for work in the UK, data from Indeed and Google Trends shows — just as the British job market seems to be pulling back a little.