March 2025 UK Labour Market Report: Starting Salaries Rise at slowest pace in 4 years

Stay informed about the latest developments and insights into the UK job market with the KPMG and REC's ‘UK Report on Jobs’, featuring exclusive insights from recruitment consultancies like Redline Group. This comprehensive monthly report provides in-depth analysis of key workforce dynamics shaping business decisions today.

Key Highlights from the March 2025 Data:

• Starting salary inflation weakens: Starting salary inflation continued to slow for the second consecutive month in February, with reports indicating that pay rates are beginning to stabilise.
• Rising candidate availability: February data indicated faster increases in the availability of candidates for both permanent and temporary roles.
• Ongoing Demand for Staff: While overall hiring demand for staff declined, sectors such as engineering, electronics, and software remain resilient.

Labour Market Insights

While the demand for workers has softened, it has not disappeared. However, there are positive indicators for 2025.

Jon Holt, Group Chief Executive and UK Senior Partner KPMG, commented

“While it is still a wait and see approach to hiring, with February data showing companies continue to hold back on recruitment, the softer decline could be an indication that expectations of further interest rate cuts and better than expected recent economic data are starting to release some of the pressures on business.

“But several headwinds to growth remain, and we should expect a Spring Statement that is fiscally constrained due to growing spending pressures and global uncertainty. Despite this uncertainty, businesses which are well capitalised will be looking for signals to support future planning and growth, and with that will come confidence to invest and create jobs.”

Sector-Specific Insights

The UK job market continues to experience skill shortages across key permanent and temporary/contract sectors, particularly in:

• Engineering & Technology: Skills shortages in areas such as Electrical Engineers, Senior Electronics Engineers, Engineering Directors, Mechanical Design Engineers, Software Engineers, Python Developers, and Technical Sales professionals.

Market Statistics

According to the Office for National Statistics (ONS), the UK recorded 819,000 job vacancies between November to January 2025, which was 110,000 fewer than the previous year. However, demand remains 2.9% above pre-pandemic levels.

Neil Carberry, REC Chief Executive, summed up the report, stating:

“After a long winter, there are some hints of a turn in the labour market as we head into Spring. This is led by the private sector - despite recent tax rises – and that shouldn’t be missed. Enabling companies to grow is at the heart of our prosperity – the Chancellor must use the Spring Statement to build their confidence in growth. At the moment, though, things are still slow as companies hold their breath in the face of significant cost rises from April with changes to National Insurance and the National Living Wage. Getting the Industrial Strategy flying is a key part of this – for the whole economy, not just key sectors - as is addressing policies in the Employment Rights Bill so they do not prove to be a brake on growth.

“Despite a long slowdown, some areas still face skill shortages. Pay growth is easing and broadly unchanged across much of the country which should please the Bank of England rate setters.”

Looking Ahead: Labour market trends for 2025 and beyond

In March, the J.P. Morgan Global Manufacturing PMI reached an eight-month high, signalling growth in regions like Brazil, India, Indonesia, and the US,  while the UK, Eurozone, and Japan continue to contract.

Global employment declined for the seventh consecutive month, with job cuts reported in China, Canada, and the Eurozone.

Additionally, the ONS estimated that borrowing in the first ten months of the 2024-25 fiscal year reached £118.2 billion, exceeding the previous year’s figure by £11.6 billion and surpassing forecasts by £12.8 billion.

Inflation and Economic Forecast

• CPI inflation was 2.5% in Q4 2024.
• Domestic inflationary pressures remain elevated but are moderating more slowly than anticipated.
• Headline CPI inflation is expected to rise to 3.7% in Q3 2025, influenced by global energy costs and regulated price adjustments.
• Inflation is expected to return to the 2% target in subsequent quarters.

Despite cautious employer sentiment, long-term indicators suggest gradual improvements in hiring trends. Staying informed is key to navigating the evolving job market.

At Redline Group, we change lives every day, building world-class teams for technology companies. As one of the UK’s most trusted recruitment specialists in Electronics and High Technology, we offer expert solutions for professional Contract, Permanent, and Executive positions. With four decades of experience, we are perfectly positioned to future-proof your hiring needs.

For tailored recruitment advice or to learn more about this month’s labour market report, contact info@redlinegroup.com or 01582 450054