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Big graduate employers in the UK are cutting hiring for a second consecutive year because of cost pressures and worries over the economic outlook, according to a new survey. 

Employers reduced hiring by 8 per cent in the last academic year, the Institute of Student Employers said on Wednesday, underlining the challenges facing young people seeking to enter the jobs market.

It is forecasting a further 7 per cent drop in graduate hiring in the current academic year, although it said this figure was pulled down by responses from three large employers. 

But Stephen Isherwood, the ISE’s joint chief executive, said fears that artificial intelligence is already displacing young professionals were misplaced. Instead, he said, employers are hanging on to existing staff and delaying new hiring because of the state of the economy. 

“It is a tough market for students and young people in general. There is not much churn in the labour market and young people are suffering,” he said, noting that graduate salaries were also being eroded by inflation as employers prioritised pay rises for existing staff. 

Graduates are now facing intense competition for the roles available, the survey found. Employers polled by the ISE received 140 applications for each vacancy for a second consecutive year — up from 86 per vacancy in 2022/23 and 38 per vacancy 20 years ago. 

The ISE said increased competition was prompting graduates to apply for more roles, but the long-term trend also reflected the greater ease of online applications and the fact that around a quarter of employers had dropped minimum academic requirements. 

Employers struggling to sift applications are also seeing higher levels of cheating, the ISE said, most commonly by candidates using AI without disclosure or permission during online interviews. 

The ISE’s survey reflects the recruitment plans of 155 employers hiring a total of around 30,000 graduates, school leavers, interns and placement students. Its year-on-year comparisons are drawn from a smaller sample.

They tend to be larger organisations running structured graduate training programmes, covering sectors ranging from law and accountancy to tech, finance, engineering, pharma and retail as well as charities and the public sector. 

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Graduate hiring by these big employers has held up better than it has in the wider jobs market, where the number of roles advertised for recent graduates has fallen by as much as 33 per cent in the last year.

The ISE recorded the sharpest falls in pharma and IT. 

Isherwood said some large employers were also hiring more school leavers through apprenticeships in place of graduates.

This looked like a response to policy changes that will prevent big companies spending the mandatory apprenticeship levy on top-level courses for existing staff, he noted. It also meant that the drop in overall entry level hiring of 5 per cent was not as sharp as the fall for graduates.