Navigating recruitment in 2025
Written by Richard Bourne from BCS Connect
The UK labour market continues to evolve, presenting a mix of opportunities and challenges.
While wage growth remains robust, employment and unemployment levels are shifting, and workforce engagement remains a concern for businesses looking to attract talent.
Labour market trends
Between September and November 2024, the UK saw steady wage growth alongside an increase in both employment and unemployment rates.
Economic inactivity showed a slight decline, yet remains elevated, highlighting ongoing difficulties in workforce participation.
The employment rate for individuals aged 16 to 64 was 74.8 per cent, reflecting a slight drop from the previous quarter, reversing some of the positive momentum gained earlier in 2024.
Meanwhile, the unemployment rate for those aged 16 and over edged up to 4.4 per cent, marking an increase on both a quarterly and annual basis.
Vacancy trends and workforce participation
Labour demand is showing signs of softening, with the total number of UK job vacancies falling by 24,000 to 812,000.
While some reports suggest vacancy levels are returning to pre-pandemic figures, there remains debate depending on data sources.
The economic inactivity rate for individuals aged 16 to 64 stood at 21.6 per cent, a slight decrease compared to previous periods.
Meanwhile, the number of payrolled employees saw mixed movement, declining by 32,000 (-0.1 per cent) from October to November 2024 but increasing by 95,000 (+0.3 per cent) over the past year.
The preliminary estimate for December 2024 suggests a further decline of 47,000 (-0.2 per cent), with little change compared to December 2023.
Wage growth and the need for productivity gains
Employee earnings continue to climb, with regular pay (excluding bonuses) rising 5.6 per cent annually in the quarter to November.
Adjusted for inflation (CPIH), real-term wage growth stood at 2.5 per cent, underscoring steady pay increases despite broader economic uncertainty.
Despite small improvements in workforce participation, businesses cannot depend solely on expanding the labour pool to drive growth.
Instead, investment in workforce development, technology adoption, and productivity-enhancing strategies will be crucial.
Industries facing the biggest cost challenges
Sectors such as industrial, manufacturing, logistics, engineering, and construction are expected to bear the brunt of rising costs.
The combination of wage increases, National Insurance hikes, and inflationary pressures is placing a significant financial strain on businesses in these industries.
For companies operating in these sectors, managing labour costs while maintaining productivity will be a key challenge throughout 2025.
Many will look to contingent staffing solutions to navigate fluctuating demand and avoid long-term commitments in an unpredictable economic climate.
The ability to scale operations up or down quickly will be critical to sustaining profitability and competitiveness.
BCS market insights
BCS has experienced a very busy start to 2025, but March has shown a significant slowdown in economic activity from our clients.
BCS expects April to bring improvements, though the overall outlook for the year remains uncertain.
Several factors are contributing to this volatility, including the increase in National Insurance contributions, the rise in the National Minimum Wage, international tariffs, and broader economic uncertainty.
In response, businesses are expected to shift towards temporary staffing solutions in April, as they navigate fluctuating inflation and rising operational costs.
Employers are increasingly turning to agency staffing solutions to maintain workforce flexibility and manage financial risks in an uncertain economic climate.
With recruitment freezes and cautious permanent hiring, businesses are relying on temporary and contract workers to bridge gaps, scale operations efficiently, and mitigate the unpredictability of inflation and overhead costs.
What’s next?
With the Chancellor’s Spending Review approaching, businesses will be looking for policies that encourage investment, innovation, and workforce development.
Employers must stay agile and refine their recruitment strategies to align with the changing labour market.
BCS Connect will be keen to find out what steps will help our clients in Industrial, Manufacturing, Construction and Engineering sectors more specifically.
BCS Connect – Connecting Talent, Bespoke Staffing Solutions. Need expert recruitment support?
Get in touch with Richard Bourne at richard.bourne@bcs-connect.co.uk or call 01543 629 090.