The UK jobs market is in limbo as businesses put the brakes on hiring amid mounting uncertainty over a potential Andy Burnham premiership and the weight of Britain's high tax burden. With the nation's future economic direction hanging precariously in the balance, recruiters are reporting a five per cent slump in available jobs in London during Q2 2026 compared to the same period last year. Professional vacancies have taken an even harder hit – decreasing by three per cent year-on-year to total just 4,636 positions.
Research from Morgan McKinley reveals that fewer than a quarter of UK firms plan to expand their workforce in the coming months, while nearly one in ten are already considering reducing staff numbers. This reluctance to hire is being driven, at least in part, by business leaders' wariness of the incoming Prime Minister's economic and fiscal policies. Commenting on this trend, Mark Astbury, director at Morgan McKinley, notes that organisations are delaying recruitment until the government's direction becomes clearer.
The potential for significant changes to taxation under an Andy Burnham premiership is also casting a shadow over hiring decisions, with many employers wary of future tax policies. This anxiety is intensified by the Prime Minister-in-waiting's commitment to sticking by the existing fiscal rules designed to reduce government borrowing. Patrick Milnes, head of people and work policy at the British Chambers of Commerce, highlights that if the next Prime Minister truly wants to support growth, they must centre investing in skills within their economic plan.
Rising employment costs, including National Insurance contributions and upcoming changes to employment law, are also playing a significant role in influencing hiring decisions. Nearly three-quarters of UK firms report difficulties in finding suitable new staff – further exacerbating the recruitment challenges faced by businesses. With growth projected at a modest one per cent according to the IMF, it's little wonder that the jobs market is struggling to gain momentum.
ONS labour market data shows that despite some positive signals from the IMF, with inflation expected to return to target in mid-2027, hiring confidence remains subdued. Employers are being forced to navigate an increasingly complex landscape of rising costs and dwindling job openings – a challenging situation likely to continue until greater clarity emerges on the UK's economic direction.