Gladness Gideon
The number of payrolled workers in the United Kingdom fell by 78,000 in March, marking a sharp decline from the 8,000 drop recorded in February, according to data released Tuesday by the Office for National Statistics (ONS).
The fall in employment figures comes ahead of the full impact of newly introduced tax hikes and mounting global trade tensions, including US tariffs that have rattled British exporters.
Job vacancies in the three months to March also declined, slipping below pre-pandemic levels for the first time since 2021 — a development analysts say may reflect growing caution among employers.
“Today’s data provides some tentative evidence that businesses started to respond to rises in business taxes and the minimum wage from this month by reducing headcount,” said Ashley Webb, UK economist at Capital Economics.
The reductions in employment and vacancies arrive just before the business tax increases outlined in the Labour government’s inaugural budget take full effect. The increases, heavily criticised by business groups, are feared to dampen hiring and curb pay growth.
Despite the job market softening, wage growth remains resilient. Regular earnings rose by 5.9 percent year-on-year in the three months to February — a rate still deemed too high to be compatible with the Bank of England’s 2 percent inflation target.
The UK unemployment rate remained steady at 4.4 percent over the same period, indicating a relatively stable labour market, albeit with signs of mounting pressure.
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Adding to the uncertainty, British companies are bracing for the impact of a 10 percent tariff on exports to the United States — part of a wave of trade barriers under US President Donald Trump’s administration targeting key sectors including steel, aluminium, and automotive products.
Webb warned that recent “chaotic” developments in US tariff policy could further weigh on business confidence and hiring decisions in the coming months.
The mixed data presents a challenging landscape for the Bank of England. While elevated wage growth may argue against loosening monetary policy too aggressively, growing risks to domestic output and employment could necessitate further support.
Yael Selfin, chief economist at KPMG UK, noted: “With pay growth still running above levels consistent with the inflation target, the Bank of England will likely continue its gradual approach to cutting interest rates. However, that will be set against growing risks to the domestic economy which are likely to depress labour market activity.”
The central bank recently halved its GDP growth forecast for 2025, citing deteriorating business sentiment and escalating global trade tensions.
In February, it cut interest rates by a quarter point — its third reduction in six months — in a bid to shield the economy from external shocks.