CBI/Pertemps Labour Market Update: August 2025

In the three months to June 2025, unemployment and employment levels rose, the economic inactivity level and economic inactivity rate both fell, and strong wage growth continued to present signs of slowing. Moreover, the number of economically inactive who want a job hit 2 million, and vacancy levels fell for the 37th consecutive quarter. This means that as of last month, vacancy numbers have been falling continually for three years. Trends seen in recent months, therefore, have continued, with slowing wage growth and dampened hiring intentions continuing to be the key messages.

The UK employment rate (for people aged 16 to 64 years) was estimated at 75.3% in the period between April 2025 and June 2025, which is slightly up on the quarter and the year. The UK unemployment rate (for people aged 16 and over) was estimated at 4.7% in the three months to June 2025, also up on the year and quarter.

The UK economic inactivity rate for people aged 16 to 64 years old was 21.0% in the quarter to June 2025, marginally down on the year and the quarter. The provisional estimate for the number of vacancies in the UK economy in the three months to July 2025 is 718,000, representing a decrease on the quarter (-44,000) and the year (-145,000).

Estimates for payrolled employees in the UK fell by 149,000 (-0.5%) between June 2024 and June 2025, and by 26,000 (-0.1%) between May 2025 and June 2025. The early estimate of payrolled employees for July 2025 decreased by 164,000 (-0.5%) on the year, and by 8,000 (0.0%) on the month, to 30.3 million. The July 2025 estimate should be treated as a provisional estimate and is likely to be revised when more data is received next month.

Annual growth in employees' average regular earnings (excluding bonuses) in Great Britain was 5.0% in the three months to June 2025, and annual growth in total earnings (including bonuses) was 4.6%. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH)), for regular pay and total pay stood at 0.9% and 0.5%, respectively, across the same period.

This month's data highlights a very similar labour market picture to the one told previously. Wages are continuing to rise in nominal and real terms, but rates of wage growth seen over the past few years are becoming increasingly unaffordable. Another drop in vacancy levels also suggests that the demand for labour is continuing to weaken, and the achievability of the 80% employment target remains in serious doubt.

The widespread impact of rising business costs across the labour market means it is imperative that the Government are mindful when introducing policies that could add to employers' cost base. Firms will be looking for the Chancellor to acknowledge the challenge and trade-offs associated with financial pressures in the fiscal event later this year, and to pull on policy levers that can help unlock business investment in their workforce. This includes making Employee Assistance Programmes (EAPs) fully tax-free benefits, as well as allocating the funding raised through the Immigration Skills Charge to skills and training initiatives.