The UK labour market concluded 2025 on a sour note, experiencing a sharp increase in the number of people seeking work alongside a significant slump in employer demand for new hires.
PMI Data Reveals Deepening Weakness
Fresh analysis of the S&P Global Purchasing Managers’ Index (PMI) has indicated that the jobs market weakened further at the end of last year. This dashes hopes for a recovery in vacancy numbers and hiring trends that some economists had forecast.
According to researchers from KPMG and the Recruitment and Employment Confederation (REC), appointments for permanent staff fell again in December 2025. This marked the 39th consecutive month of decline for permanent placements.
The headline PMI reading for permanent placements slumped to 44.3 in December, well below the neutral 50.0 threshold and the lowest score recorded since August 2025. Temporary staff billings also declined at a quicker pace in the final month of the year.
The data revealed a "marked reduction" in demand for workers, while the supply of candidates continued to expand rapidly. This surge in available jobseekers was partly driven by an increase in redundancies, making it harder for individuals to secure new positions.
Policy Pressures and Business Concerns
These disappointing figures are set to increase pressure on Labour government officials, who may face criticism for adding costs to sectors like hospitality and manufacturing. Businesses are navigating changes from last April's national insurance adjustments while also preparing for new regulations under the Employment Rights Bill.
While firms secured a minor concession with the extension of the time limit for unfair dismissal claims from one day to six months, they also saw the compensation cap for successful cases removed. Other parts of the bill remain unchanged, with some aspects subject to review via 26 consultations.
Neil Carberry, chief executive of the REC, commented on the pressures facing employers. "The fact that the market slipped back a little in November is a reminder of the pressure employers are under," he said.
"The second half of 2025 showed some signs of a long run of negative data softening, and with placements falling at a slower pace than the 2025 average in December there is some hope that we are seeing a December dip, rather than a change in the trend."
Carberry added a call for government clarity: "With the Budget behind us, the government needs to set out a clear path that firms can believe in, from the industrial strategy to pragmatic approaches on the Employment Rights Act, which is worrying many firms."
Financial Services Sector in London Hit Hard
The downturn was not confined to the wider national market. A separate survey by recruitment agency Morgan McKinley pointed to significant job losses in London's financial heart.
The data showed a 13 per cent decrease in available financial services jobs across London in the fourth quarter of 2025, compared to the period from July to September. Roles for brokers and administrators were hardest hit.
In a rare bright spot, the fintech sector bucked the trend entirely, recording a 50 per cent year-on-year rise in hiring activity.
