Chamber past president, and Director of Chamber Patron, Hewett Recruitment, provides update on current trends and challenges in employment
“The UK labour market is experiencing transformative shifts, primarily influenced by advancements in artificial intelligence (AI) and significant legislative changes, including the upcoming increase in the National Living Wage and rises in Employer National Insurance contributions. These elements are reshaping the landscape of employment and recruitment, posing both challenges and opportunities for businesses.
Firstly, the integration of AI into the workplace continues to be a double-edged sword. On one hand, AI technologies are creating efficiencies and new capabilities in sectors such as manufacturing, finance, and services by automating routine tasks, enhancing data analysis, and improving customer service through AI-driven interfaces. This shift is not only redefining roles but also demanding a new calibre of skills from the workforce. Employees are increasingly required to adapt to these technologies, necessitating ongoing learning and development initiatives within organisations.
However, the acceleration of AI adoption also stirs anxieties around job displacement. As certain tasks become automated, the nature of work changes, leading some roles to become obsolete, while simultaneously generating new roles that require specific, often more advanced, skill sets. The recruitment sector must respond by not only filling these new positions but also by aiding businesses in managing transitions and reskilling efforts. This is where strategic workforce planning becomes essential, ensuring that talent management aligns with shifting industry demands.
In addition to the change being driven by AI, the increase in the National Living Wage, set to rise in April, is a welcome development for workers, promising a higher baseline salary that could enhance living standards and stimulate consumer spending. However, looking at it from a business point of view, the increase in cost is compounded by the corresponding rise in Employer National Insurance contributions, escalating the cost of employment amidst already challenging economic conditions.
This “double whammy” poses a financial challenge for businesses, particularly SMEs, which will face tighter margins and must look at how they mitigate this. One option is through price increases – which could in turn fuel inflation – but more worrying is the impact on job creation within the UK. Simply put, firms will need to be more judicious in their recruitment strategies and workforce management. Investing in employee retention through better wages, benefits, and work conditions becomes even more crucial as it can be more cost-effective than the cycles of hiring and training new staff.
However, there is every indication that organisations are already looking at reduced hiring needs, and in some cases reducing their workforce, in order to manage such significant increases in employment costs. Another option is that of using agency workers to deal with short term surges in demand, without overcommitting to taking on a Permanent staff member. This may also appeal to companies with one eye on the upcoming Workers Rights Bill which is due to take effect in April 2026. Additionally, the higher operational costs may drive further AI adoption as companies look to automation for cost-saving efficiencies, creating a cycle that continually influences the labour market dynamics.
Looking ahead, as the UK labour market evolves under the influence of AI and deals with the significant effect of the increased cost of employing someone, businesses need to stay agile. The key to thriving in this new environment is adaptability—leveraging technology to enhance productivity while fostering a workforce that is resilient and responsive to the demands of a rapidly changing workplace. Recruitment professionals play a pivotal role in this transition, not just as facilitators of hiring, but as strategic partners advising on talent management and technological integration. The future of work is now, and it demands a proactive and informed approach to harness its full potential.”