“Graduate hiring has particularly suffered, with a striking 63% decline in UK graduate job postings since mid-2022.”
The UK job market is in a critical position, as revealed by the July S&P Global Flash PMI. Employment contracted at its fastest pace since February, driven by low demand and rising payroll costs. The headline composite index fell from 52 in June to 51 in July, near stagnation. Services activity declined from 52.8 to 51.2, while manufacturing showed modest improvements.
Off the back of this challenging economic environment, grad hiring has been seen to have particularly suffered, with a 63% decline in UK graduate job postings since mid-2022, according to the Financial Times.
Understanding this report and the wider economic situation requires recognising several interwoven factors, making the scenario significantly more complex than it first appears. There’s certainly an effect from higher employment taxes in April increasing hiring and retention costs, having a cooling effect on some businesses hiring plans. Global tensions, particularly US tariff threats, have curtailed confidence and investment.
Other factors at play include some selective off-shoring: the entry-level jobs market is still quite strong in developing countries which suggests that graduate jobs are still being created, just in different locations. Following the post-Covid hiring boom, another factor is the impact of cyclical downturn in demand and, as with previous downturns, it could bounce back.
“Persistent economic pressures could escalate into a broader downturn, severely restricting job opportunities across all sectors.”
Given this context, the UK job market faces three possible scenarios for the rest of this year: moderate recovery, further decline or stagnation.
Scenario 1: Moderate Recovery
In the best case, the Bank of England’s anticipated interest rate cut from 4.25% to 4% in August will provide a gentle stimulus, lifting business and consumer confidence and steadying the market. Hiring would cautiously rebound, especially in roles that are able to drive efficiencies and competitive advantage.
Scenario 2: Further Decline
Alternatively, the market may remain stagnant, with employment taxes, geopolitical uncertainty and lingering inflationary pressures prompting businesses to adopt a defensive hiring stance. Financial services firms, under pressure to control costs, would limit hiring to essential roles, outsourcing many junior positions overseas or removing them entirely. Even areas often considered insulated from automation risks, such as training or human resources, would feel hiring constraints suggesting deeper economic challenges.
Scenario 3: Stagnation
In a more troubling scenario, persistent economic pressures could escalate into a broader downturn causing unemployment to rise above 5% and severely restricting job opportunities across all sectors. Financial services would respond with significant headcount reductions placing immense pressure on recruitment, particularly at the junior and mid-levels. However, critical technical roles, especially senior-level software engineers and quantitative developers, may remain somewhat protected given their strategic necessity in turbulent markets.
Long term impacts
The pronounced downturn in graduate hiring, observed clearly in both the UK and US, risks creating long-term skills gaps, particularly in key professional sectors such as technology, finance and professional services. With fewer entry-level roles available, graduates face heightened competition, slower career progression and potential long-term wage suppression. For businesses, this could result in future shortages of skilled mid-level professionals, higher future recruitment costs and challenges in maintaining innovation and competitiveness in a globally interconnected economy.
The PMI survey and employment data highlight immediate challenges and structural issues within the UK’s labour market. Leaders in technology, talent acquisition specialists and technology professionals must understand these potential trajectories to prepare strategically for the future.
Sources
- UK S&P Global Flash PMIs (Jul. 2025), 24 July 2025: https://www.pmi.spglobal.com/Public/Home/PressRelease/eb7d183cec2d45aea6fcbb1edf8e2b94
- UK firms cutting staff at fastest pace since February as economy struggles – Phillip Inman, The Guardian, 25 July 2025: https://www.theguardian.com/business/2025/jul/24/uk-firms-cutting-staff-at-fastest-pace-since-february-taxes-us-tariffs-pmiu-survey