Vacancies drop to fresh five-year low as small firms remain under pressure – ONS

Job vacancies have fallen to a fresh five-year low as small firms continue to hold back from hiring amid soaring wage costs, according to official figures.

The Office for National Statistics (ONS) said there were around 8,000 fewer vacancies quarter on quarter in the three months to August, at 702,000, which remains the lowest since spring 2021, or, outside the Covid pandemic years, for over a decade.

Small firms are flagging ongoing pressures from rising wage bills as a factor holding them back from taking on staff, according to the ONS.

The data showed regular average weekly earnings growth remained unchanged at 3.5% in the three months to July, while it continues to outstrip inflation, rising by 0.8% with the Consumer Prices Index taken into account.

Total wage growth stood at 3.9%, down from 4.2% in the three months to June.

This is a key figure for the pensions triple lock calculation and puts pensioners on course for a 3.9% uplift in the state pension next year, according to experts.

The UK unemployment rate also remained unchanged at 4.9% in the three months to July, but more timely data estimates that workers on payrolls slumped by 26,000 during August to 30.2 million, following a 19,000 drop in July.

While the latest figures are subject to revision, the August drop is the largest payroll decline since November last year.

Liz McKeown, ONS director of economic statistics, said: “Payrolled employee numbers continue to edge down, with falls over the past year particularly evident in the retail and hospitality sectors.

“Vacancies remain at their lowest level outside the pandemic period for more than a decade, with smaller businesses continuing to report that increased labour costs are affecting hiring decisions.”

The figures come ahead of the interest rate decision on Thursday, with Bank of England policymakers expected to vote to hold at 3.75%.

Thomas Pugh, chief economist at RSM UK, said that despite ongoing weakness, the statistics show signs of stabilisation in the jobs market, which may give the Bank room to increase rates to combat inflation in the coming months.

Official inflation data on Wednesday will be watched closely by the Bank as fears mount that soaring oil and energy prices caused by the Iran war will send the cost of living racing higher over the next few months.

Private sector wage growth stood unchanged at 2.9% in the latest ONS figures and remained at six-year lows, but there are concerns that earnings will creep up again as wider inflation builds.

Mr Pugh said: “The Monetary Policy Committee (MPC) has so far relied on the weakness of the labour market as cover for keeping rates on hold, but that position looks increasingly difficult to hold if the labour market stabilises and inflation rises to around 4%.

“We still expect the MPC to hold rates on Thursday, but a rate hike as early as November is now looking much more likely.”

Pantheon Macroeconomic experts now expect the Bank to raise rates in November and next February, as it said attentions are turning to “whether a loosening labour market can offset what surging energy costs will eventually do to wage growth and inflation”.

Work and Pensions Secretary Pat McFadden said the ONS figures “show a labour market that remains resilient in the face of significant global economic pressures”.

“But we know there is more work to do, particularly to ensure young people gain the skills, experience and confidence needed to succeed,” he added.

Published: 15/09/2026 by Radio NewsHub