UK vacancies hit 12-year low as unemployment falls before budget

UK vacancies have fallen to their lowest level in over 12 years outside of the pandemic, according to Ben Harrison, director of the Work Foundation at Lancaster University — a warning shot just days before next week's budget.

The drop comes even as headline unemployment fell in the latest quarter. Harrison says the government shouldn't read that as an all-clear.

"The UK is still amidst a jobs drought with vacancies at their lowest for over 12 years outside of the pandemic," Harrison said.

How weak is the labour market?

The picture is flat, not recovering. Data from the latest quarter shows the employment rate edging up and a small drop in unemployment, Harrison said. Payroll employment remains slightly down over the same period, though the most recent month suggests that decline may be levelling off.

Total pay tells its own story. Regular wage growth stayed relatively stable, but total pay — including bonuses — has eased to its lowest rate in nearly six years, according to Harrison's reading of the data.

The labour market has remained broadly flat through 2026, he added. That stagnation frames the budget debate: a falling unemployment rate, but little momentum underneath it.

What about young workers?

Youth unemployment is the sharpest number in the release.

• 715,000 people aged 16–24 are unemployed.
• That figure is down 28,000 on the quarter.
• It's still 54,000 higher than 12 months ago.

So the quarterly improvement is real but small against a year of deterioration. Harrison flagged the youth figures as a specific pressure point going into the budget.

Why are vacancies falling?

The number of vacancies has seen its largest fall since the start of the year, Harrison said. The cuts are concentrated mainly within smaller businesses.

Those firms cite increased labour costs as a key factor, he added. That detail matters for next week's budget arithmetic: if small employers are already pulling back on hiring because of what labour costs today, any fresh burden in the fiscal statement risks deepening the vacancy slump.

What does this mean for the budget?

Harrison's message to the government is direct: don't be complacent about the state of the labour market ahead of next week's budget.

The numbers back him up. Vacancies at a 12-year low outside the pandemic, payroll employment slightly down, total pay growth at its weakest in nearly six years, and youth unemployment 54,000 higher than a year ago — none of that reads like a pre-budget boom, whatever the headline unemployment rate says.

The one soft spot in the bearish case is timing: payroll data for the most recent month suggests the decline might be starting to level off, and the employment rate did edge up in the latest quarter. But one month of levelling isn't a trend, and it arrives alongside the sharpest vacancy drop since January's start-of-year point.

For Chancellor-level planning, the takeaway is that the labour market's flatness gives the budget little cushion. Watch whether next week's measures add to the labour costs that smaller businesses already blame for cutting posts — or whether they protect the hiring channel that 715,000 unemployed young people are waiting on.

By Amara Osei