UK Labour Market Shrinks by Nearly a Fifth in 2023

Recruitment boss James Reed calls ‘time of death’ on Candidate-Driven Market

Research conducted by Reed.co.uk, one of the UK’s leading jobs and careers sites, has revealed a significant decrease of 17 per cent in job postings during the first half of 2023 compared to the previous year. Over the same period, there has been a steep 29 per cent rise in job applications, suggesting a softening of the UK’s labour market and a potential shift in the balance of power between employers and employees. 

The drop in job postings reflects the ongoing economic challenges faced by businesses in the first half of 2023. However, certain sectors have showcased remarkable resilience and growth despite the uncertain landscape. The Motoring & Automotive sector experienced a surge of 63 per cent in job postings, followed closely by the Energy sector with a 47 per cent increase. 

Conversely, Reed.co.uk data revealed that the Hospitality and Catering sector experienced a steep decline of 41 per cent in job postings, while the Social Care sector experienced a 39 per cent drop. These figures emphasise the stark challenges these industries face and the need for innovative solutions to support their recovery. 

While the number of new job postings declined, job applications saw a remarkable rise of 29 per cent in the first half of 2023 compared to last year. The IT & Telecoms sector experienced the highest surge in applications, with a massive increase of 72 per cent, while the Education sector also experienced a rise of 60 per cent.  

While some sectors thrived in attracting job applications, others continue to face an uphill battle. The Training sector experienced a notable decline of 34 per cent in applications, followed by the FMCG sector with a decrease of 12 per cent. An indication that more can be done to bridge the gap between job seekers and available opportunities in these sectors. 

As expected, given the ongoing cost-of-living crisis, average salary offering across every sector rose in the first half of 2023 compared to last year. Sectors that saw the greatest rise include the FMCG (20.8 per cent), Charity & Voluntary (14.5 per cent), Manufacturing (10.6 per cent) and Customer Service (10.1 per cent) sectors.  

Meanwhile, roles in the Scientific, Financial Services and Human Resource sectors experienced the least YOY growth in average salary offerings — 2.1 per cent, 2.1 per cent and 0.5 per cent respectively. Dragging far below the rate of inflation over that same period.  

James Reed, Chairman of Reed.co.uk, comments: 

“The significant drop in job postings, coupled with the surge in job applications, indicates that a radical shift in the employment landscape is underway — as we move from a ‘sellers’ to a ‘buyers’ market for talent. This likely marks the end of the candidate-led labour market that emerged post-pandemic, as the balance of power tilts back towards employers. 

“With fewer job opportunities and a rise in job seekers, candidates will likely face increased competition for new roles. As employers regain control over the hiring process, this has the potential to impact everything from salary negotiations to the flexible/remote working arrangements that have become essential for employers looking to attract and retain talent. 

“While certain sectors have demonstrated resilience, the drop in job postings reveals the toll of long-term economic uncertainty on businesses this year. Looking ahead, the growing reductions in job postings – a trend that accelerated in the second quarter of the year – could be an indicator of a pending recession.   

“The data suggests the post-jobs boom deceleration which we saw in the latter half of 2022 is moving beyond a mere ‘cooling off’ period and could turn into an economic downturn. 

“It’s crucial for employers to recognise that despite the economic uncertainty, hiring and retaining top talent should remain a top priority. Investing in securing the right people now will position businesses for success when the economic recovery begins. Business leaders should also ensure staff are being paid fairly for their efforts by taking a generous view and increasing wages wherever possible. 

“The government now has a critical role to play in inspiring greater confidence amongst employers to ensure they continue to invest in growing their businesses. Following from the NHS Long-Term Workforce Plan, it is time for an even more ambitious national workforce strategy to help stimulate economic growth across all key industries.” 

Northern Ireland emerged as the most resilient according to Reed’s data, with a 3 per cent boost in job postings, potentially a sign of increased business confidence in the aftermath of the Windsor Framework.  

All regions in England experienced a decline in job postings ranging from 15-18 per cent, with London itself experiencing the largest drop at 18 per cent. 

Notably, North West England and Yorkshire saw a significant boost in job applications – an increase of 34 per cent and 35 per cent, respectively, demonstrating potential growth avenues for businesses wanting to level up.