Employers have cut their graduate intake for the second consecutive year amid economic pressures as university leavers face an increasingly challenging jobs market, research has revealed.

Graduate hiring has fallen by 8 per cent year on year, according to a survey of 155 employers by the Institute of Student Employers (ISE). However, apprenticeship recruitment has moved in the opposite direction, increasing by 8 per cent.  

Despite the growth in the number of apprenticeships, the overall entry-level job market was down 5 per cent, with 42 per cent of employers reducing graduate hiring and 40 per cent cutting school and college leaver hiring. 

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Stephen Isherwood, joint CEO of ISE, acknowledged that it was a “tough job market” for those leaving education. However, he stressed that many companies were still hiring entry-level talent. 

“The balance between graduate and apprentice hiring is shifting for a number of employers as they look to diversify how they get talent into the business to meet skills shortages,” he said. “This means more opportunities for students to get into the UK’s leading businesses. However, the market is complex. Graduates still outnumber apprentices, and they remain a core element of recruitment.”

The change in strategy from organisations towards hiring more apprentices was down to increased demand for practical skills, according to Jack Jarrett, former international resourcing business partner at Amnesty International. 

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In contrast, graduates are facing a particularly challenging jobs market. In June, Indeed reported that the number of graduate roles had fallen to its weakest level since 2018. 

The big four accountancy firms have also all cut back on graduate hiring. KPMG reduced its graduate cohort by 29 per cent, from 1,399 in 2023 to 942 last year, while Deloitte’s graduate recruitment fell by 18 per cent. EY and PwC followed suit, reducing their graduate hiring by 11 per cent and 6 per cent respectively. 

David Morel, CEO of Tiger Recruitment, explained that the statistics reflected broader trends in the labour market as companies exercise caution in hiring because of economic uncertainty. “Over the past year we’ve seen a similar pullback from employers and the competition for roles has never been fiercer,” he said. 

The adoption of AI may also be partly to blame, according to Jarret. “AI is automating many of the routine tasks that traditionally served as training grounds for graduates. AI is chewing through the boring work companies once used to train new talent,” he said. 

Long-term implications

Morel described the long-term implications as “concerning”. “A gap in early-career recruitment will create future talent shortages and organisations may struggle to maintain a flow of skilled employees,” he said. 

Employers also risked “demoralising” the next generation and increasing workload pressures on existing staff, Jarrett added. 

Graduate schemes often form the initial stage of organisations’ talent pipelines. “Cut them consistently, and you create a workforce with no juniors and no one left to learn from,” Jarrett explained. “This leadership vacuum will be expensive and difficult to fill later. Without fresh talent, organisations risk stagnation and reduced innovation.”

Despite the cuts in graduate hiring, applicant numbers are increasing. Since 2002-03, the average number of applications per graduate vacancy has more than tripled, from 38 to 140, according to the ISE. More than 1.2 million applications were submitted for just under 17,000 graduate vacancies in 2023. 

The ISE has attributed the rise in applications to the use of AI by candidates, which has allowed them to write CVs and cover letters more quickly.

Fewer graduate opportunities and an increase in applications means competition is heightened, leaving talented graduates frustrated, said Morel. It also creates a “double-edged sword” for HR teams, he added.

“While we have more candidates to choose from, the sheer volume makes it harder to identify genuine talent,” Jarrett explained.