The number of people in paid employment has dropped sharply, with UK payroll jobs falling in March 2024 at the fastest monthly rate since the height of the Covid-19 pandemic, according to new data from the Office for National Statistics (ONS).
Figures show a drop of 78,000 workers on UK company payrolls last month, following a revised fall of 8,000 in February. The decline reflects rising employer caution amid mounting global uncertainty, tax pressures, and concerns that Chancellor Rachel Reeves’s budget could further squeeze hiring and pay growth.
Payroll Numbers Decline as Wage Growth Remains High
Despite the fall in payrolls, the official UK unemployment rate held steady at 4.4% in the three months to February. Average pay, excluding bonuses, grew by 5.9%, slightly below the 6% forecast by City economists but still at historically high levels.
However, experts warned that low response rates to the Labour Force Survey have compromised the reliability of official employment data, with some policymakers left “flying blind” when making critical economic decisions.
Budget Measures and Cost Pressures Driving Job Cuts
Business groups have blamed Reeves’s October budget for exacerbating labour market pressures, citing the £25 billion increase in employer national insurance contributions and a 6.7% rise in the national living wage. Companies in sectors such as hospitality, leisure, and retail—which typically rely on lower-paid workers—have warned of significant strain.
HMRC’s real-time payroll data shows that while health and social work employment rose by 70,000, this was offset by a 92,000 drop in jobs within accommodation and food services. Overall, annual growth in payroll jobs turned negative for the first time since April 2021, dipping to -0.2% in March.
“The UK jobs market is entering a turbulent period,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales. “Global uncertainty and higher employment costs, particularly national insurance hikes, are likely to push up unemployment despite ongoing skills shortages.”
Vacancies Drop Below Pre-Covid Levels
Job vacancies fell by 26,000 in the three months to March, reaching 781,000—below pre-pandemic levels for the first time since 2021. Economists said the sharp drop in hiring signals that employers are scaling back amid rising costs and uncertainty linked to international trade tensions, including fears over Donald Trump’s renewed trade war.
Rate Cut Expected as Bank of England Eyes Labour Market Trends
The Bank of England is closely monitoring the labour market for signs of weakening pay pressures that could ease inflation. With clear signs of slack emerging, markets anticipate the Monetary Policy Committee will cut interest rates from the current 4.5% level at its next meeting on 8 May.
“The MPC now has the green light to cut rates,” said Sanjay Raja, chief UK economist at Deutsche Bank. “Trade uncertainty is rising, and the labour market is softening.”
Still, economists note that the jobs market remains relatively resilient. “Employment has cooled but not collapsed,” said Ashley Webb from Capital Economics. “However, if global risks persist, firms may hold back on hiring and wage growth could lose momentum.”
