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Wednesday, Sep 03, 2025

UK firms report fastest growth in labour market since pre-pandemic

UK firms report fastest growth in labour market since pre-pandemic

BDO index rises for fifth consecutive month but inflation and Ukraine war could curtail jobs boom
Employment growth in the UK returned to pre-pandemic levels in March, but the jobs boom looks set to be short-lived amid rising living costs and the impact of the war in Ukraine, a report says.

The business advisory firm BDO said UK companies reported the fastest growth in the labour market since February 2020.

BDO said its index, which measures business sentiment among senior managers, rose for a fifth consecutive month to a reading of 112.74 last month – a two-point increase compared with February. Anything above 95 is considered to be growth.

Managers in the manufacturing and services sectors were the keenest on hiring new staff, it said, as their optimism outweighed concerns across the economy about disrupted supply chains.

Kaley Crossthwaite, a partner at BDO, said: “The labour market has shown resilience throughout the pandemic and then continued growth as restrictions have gradually lifted. While it’s reassuring to see employment return to near pre-pandemic levels, this strong form could come to an end as the cost of living crisis, rising inflation and wider geopolitical matters distract businesses from growth and place pressure on the employment index.”

BDO’s findings back up recent data from the Office for National Statistics that showed a fall in the UK’s unemployment rate to 3.9% in the three months to January, dropping below pre-pandemic levels for the first time.

The Resolution Foundation, an independent thinktank that monitors living standards, said wage growth had been driven up by a competitive labour market as firms increased pay to attract and retain workers. However, its economists fear wage growth will soon be offset by rising inflation and soaring energy prices, meaning workers will not feel the effects of a buoyant labour market.

Nye Cominetti, a senior economist at the Resolution Foundation, said: “With inflation set to reach 8% in the coming months, most workers’ earnings will fall in real terms, further squeezing living standards in the months ahead.”

On Friday it emerged that in the US the number of people signing on for unemployment support had dropped to 166,000 last week, its lowest level since 1968.
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