Cost pressures continue to hit labour market

16 September 2025

Figures from the Office for National Statistics (ONS) showed annual growth in regular earnings, excluding bonuses, slowed to 4.8% in the three months to July, down from 5% in the three months to June.

The official unemployment rate was unchanged on the previous month in July, at 4.7%, the highest level in four years. This edged up from 4.6% in the previous three amid a broad-based slowdown in hiring, falling job vacancies and rising unemployment-related benefit claims.

Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce said: “The ongoing impact of business cost pressures, most notably from the national insurance hike, continues to hit the labour market.

“Unemployment remains high and vacancies continue to fall with firms having to make difficult decisions on recruitment. Average earnings, including bonuses, gives a better picture of what businesses are facing, and between May and July that picked up to 4.7%.

“Our latest survey showed labour costs remain the biggest cost pressure for SMEs, cited by 73% of firms. Continued wage growth is also impacting the wider economy. The Bank of England Governor told our annual conference in the summer that it is an important factor behind persistent services inflation.

“Further employment costs are looming for businesses. The £5bn cost associated with the Employment Rights Bill poses a further threat to firms’ investment and recruitment plans. Without further amendment, the legislation will add even more to employers’ costs.

“Firms can’t absorb further cost pressures. That’s why we are clear, there must be no more taxes on business in November’s Budget. The Chancellor must also use her statement to invest in workforce health and skills, two issues currently hampering the business growth we all want to see.”

Read the full ONS data here.