Vacancies are declining, applications are down and employers are hiring less.

This is confirmed by ONS data out this morning, which shows the number of vacancies in the UK fell by 10,000 on the quarter, to 728,000, in June to August 2025. This is the 38th consecutive month vacancy numbers have dropped – an unprecedented period of decline. Estimates for payrolled employees in the UK fell by 142,000 between July 2024 and July 2025.

While the picture is complex, two factors stand out: the increased burden of employers’ National Insurance and the growing deployment of artificial intelligence in the workplace.

Thanks to a new survey of over 500 employers by Reed, we know that 22 per cent of firms say the increase in employers’ NI has forced them to cut back on recruitment. Meanwhile 15 per cent say the same of AI. More than one in five firms (21 per cent) report they have implemented a hiring freeze.

In the Autumn Budget last year, the government raised employers’ National Insurance from 13.8 per cent to 15 per cent and lowered the threshold at which employers begin paying it, from £9,100 to £5,000 annually. These were not trivial changes, amounting to a £25 billion tax hike on business. We were not alone in warning that there would be an impact on the job market of the sort we are now seeing. Many employers we work with report hiring freezes, reduced headcounts or delays in taking on new staff as direct responses.

When it comes to AI, many employers are looking to use it to cut costs. A survey by Boston Consulting Group showed over half of UK businesses plan to prioritise investment in AI over hiring as a result of higher labour costs, including tax and employment regulation.

AI can of course create opportunity – in better productivity, new roles and higher pay for certain skill sets – but it also displaces, reshapes and eliminates roles. This is particularly true of entry-level and graduate jobs which involve a lot of research work, much of which can now be farmed out to AI.

The result of all this is a tougher job market. A Reed survey of over 2,000 jobseekers found that 41 per cent say they can find too few vacancies, 39 per cent report too many applicants per job and 39 per cent say pay levels being offered are not keeping up with cost of living.

Add to that the fact that a third say they will only leave their current role for a significant pay rise, while more than half (57 per cent) are worried about job security. Many feel stuck.

For entry‑level and graduate job seekers the situation is especially bleak: only 44 per cent are optimistic about the near future. Our data shows that the number of graduate jobs posted on Reed.co.uk has fallen to less than a third today of what it was in 2021, from over 180,000 to just 50,000 last year. This is a dramatic and worrying fall.

I am concerned that many of the ways in which the job market is under strain are not just cyclical but structural. Technology, especially AI, is changing the shape of demand for labour. Roles involving routine, repetitive tasks are increasingly automatable. At the same time, entry‑level roles that act as stepping stones for young people or for those rejoining the workforce are under pressure.

We may be facing as big a disruption to the workforce as we saw in the 1980s, except this time white collar jobs rather than blue collar ones will bear the brunt.

There are some bright spots on the horizon, with AI-proof sectors such as social care and hospitality doing well, and both employers and jobseekers expecting things to improve in the coming months.

But we need carefully targeted measures to support jobs. That is why Reed is taking the unprecedented step of offering a million free job postings on Reed.co.uk.

The Million Jobs Giveaway, launched this week, offers new and existing employers up to a million free job listings between now and the end of the year to support recruiters and jobseekers.

Recruiters and employers can claim free job adverts until December 31 2025, and they’ll have until the end of January 2026 to post their roles. This will help ensure more jobs are available in the New Year – one of the busiest times of year for jobseekers.

We need government to play its part too. There is a Budget coming up in November and while I understand the public finances are not in great shape, I hope that rather than loading more tax costs onto employers the Chancellor will look at targeted measures to support them where she can.

I was encouraged to see the idea floated of a cut in VAT on energy which would help employers and encourage the Government to get on with reform of business rates. Later in the Parliament, I hope the rise in employers’ NI will be revisited.

We need targeted support for entry‑level, part‑time, and lower‑wage roles. We also need investment in skills to meet the demand for those with a command of AI, data and digital technology. And we need apprenticeships that really work and set people up for careers that will last.

If we do nothing, the jobs drought risks becoming a desert. If employers stop hiring, a generation of graduates and school leavers risks being left behind. Economic growth and social mobility will suffer.

We need government, businesses, and the recruitment sector working together to ensure that policy choices do not make a bad situation worse.

The UK can still build a strong, vibrant labour market fitted for the 21st century – but only if we respond to what is already happening in our job market.

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James Reed is chairman and CEO of Reed.

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