UK labour market falters: New data reveals limited employment growth post Budget
Employment Hero, the global leader in HR, hiring and payroll software, has today released its December Jobs Report, a snapshot of employment and wage trends based on real-time data from over 115,000 employee records within small businesses in the UK. The latest data reveals that employment gains in December were muted, rounding off a trend of slowed growth for small businesses which persisted throughout 2025.
Employment Hero has been tracking these trends over the last 12 months, showing the real-world impact of the Autumn Budgets and subsequent employment law updates. Small businesses, which employ the majority of the UK workforce, responded immediately to these changes, with a sharp monthly employment decline of -1.1% recorded in April 2025. This set off a chain of events that has shaped employment patterns for the rest of the year.
Hiring stumbles again at critical time
Traditionally, December is a crucial month for jobseekers, as employers take on extra staff to meet heightened consumer demand. However, the latest figures show minimal growth, with employment increasing just 0.5% month-on-month, the lowest monthly increase observed since April.
The muted increase suggests that the usual seasonal hiring surge did not materialise, indicating small businesses are staying cautious amid ongoing economic uncertainty following the 2025 October Autumn Budget, which many small businesses felt did little to support them. Retail and hospitality were particularly affected, with employment in these sectors contracting by -2% in December.
Papering over the cracks
Despite the small uptick in December, employment growth has lost momentum over the longer term. The data reveals a significant drop in year-on-year employment growth, which has fallen from 7.8% in December 2024 to 2.5% in December 2025. This suggests that, while small businesses remain resilient and eager to hire, they have struggled to keep up the pace of growth seen in 2024.
Kevin Fitzgerald, UK managing director at Employment Hero said: “We’ve been tracking employment trends across the UK for a full year and the data makes clear the real-world impact that policy has on small businesses. Our latest figures show that, while small businesses remain resilient, they are cautious, with employment growth slowing and the usual seasonal surge failing to materialise. Many are still adjusting to changes from last year’s Autumn Budget and structural barriers continue to hold back investment and growth.
Looking ahead, the Employment Rights Bill will be front of mind for many small business leaders, who will be considering how best to navigate the changes coming into force in April 2026. This is a real opportunity for the government to provide clear guidance and work collaboratively with small businesses, helping them plan and grow.”