The number of UK employers expecting to increase headcount in the next three months has fallen to a record low, outside of the pandemic, as they grapple with rising employment costs and growing global uncertainties.

This is according to the latest Labour Market Outlook report from the CIPD, which shows that the rate of employers expecting to increase headcount has fallen sharply among large private sector employers, and in retail in particular.

The report’s overall net employment balance (NEB) – the difference between employers expecting an increase in staff levels and those expecting a decrease in the next three months – fell from +13 last quarter to +8 this quarter. This marks a record low, outside of the pandemic, since the CIPD began collecting this measure in 2014.

The net employment balance has fallen into negative territory in the public sector, from +3 to -4, and has continued to fall in the private sector, from +16 to +11, which is a record low outside of 2020 (the pandemic).

One in four employers (24%) plan redundancies in the next three months. This is consistent with last quarter but higher than the 21% registered in Autumn.

The retail and education sectors are facing acute pressure, the research found. The NEB for trail has fallen from +23 in Autumn 2024 to -19 this quarter. Just one in ten (11%) retail employees expect there will be an increase in staff levels in the next three months, with three in ten (30%) expecting a fall in staffing levels.

The NEB is also in negative territory, -13 among employers in compulsory education which includes primary and secondary education, and -7 among those in non-compulsory education, which includes vocational and higher education institutions.

Overall, 61% of employers plan to recruit in the next three months, down from 64% in the previous quarter and 67% in Autumn 2024.

The fall in employers expecting to increase staffing levels in the next three months is driven by large private sector employers. Last quarter 39% of private sector employers expected there would be an increase in their staffing levels but this has fallen to 32%.

“From April, employers across the UK have begun to feel the full effect of increases to National Insurance Contributions and the National Living Wage outlined in last year’s budget,” James Cockett, senior labour market economist at the CIPD said.

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“They’re also looking at the potential impact of the Employment Rights Bill on employments costs and plans, and this comes at a time of global uncertainty. Employer confidence is low which is being reflected in their hiring plans.

“The Employment Rights Bill is landing in a fundamentally different landscape to the one expected when it formed part of the Labour manifesto in summer of last year. It was always going to be a huge change for employers but they’re operating in an even more complex world now.

“It’s vital the government works closely with employers to balance the very real risk of reductions in investment in people, training and technology with their desire to reduce poor employment practice. The government can address employer nerves around the bill by prioritising an implementation plan with a clear phased timeline, alongside support and guidance for employers, and smaller businesses in particular.”

The report also found that over a quarter of employers (27%) conducted a redundancy programme in the last 12 months.

Of those, half (50%) offered affected workers an enhanced redundancy package, going beyond what the law requires. 41% offered the minimum statutory amount, with the remaining 9% not knowing what offer was made.

Smaller employers (less than 250 employees) were far more likely to offer statutory redundancy pay (54%) than larger private sector employers (37%).