How the sectoral mix of UK jobs is changing and what it means

We expect UK employment will dip slightly in the second half of this year, as job cuts in lower-paid parts of the private sector more than offset continued solid public sector job creation. Though we forecast a gradual recovery in private sector employment will take hold in 2026, it’s unlikely to be strong enough to prevent unemployment drifting up towards 5%, from 4.5% in Q1.

What you will learn in this report:

• Early data on the impact of the increases in employers’ national insurance contributions and the national living wage in April suggest substantial job losses and falling vacancies in lower-paid sectors, such as accommodation and food. We think this is a one-off adjustment to the recent build-up in cost pressures rather than the start of a persistent decline in job numbers.
• The public sector has been responsible for nearly three-quarters of net job creation since 2019. This support is likely to weaken from next year as government departments adjust to tighter budgets.
• But public sector employment should continue to rise. The National Health Service accounts for more than a third of public sector jobs, and a combination of its political importance and its struggle to improve productivity mean its demand for workers will remain strong.