UK Labour Market Softens As Hospitality Sector Faces Workforce Challenges

The UK labour market showed further signs of cooling in the latest quarterly data released today by the Office for National Statistics, with unemployment climbing to 4.7% between May and July 2025 – a development that could have mixed implications for hospitality and licensed trade businesses already grappling with staffing challenges.

The unemployment rate has increased from the previous quarter and stands higher than the same period last year, while payroll employment dropped by 142,000 workers (0.5%) in the year to July 2025. The most recent monthly data for August shows payrolled employees falling by 127,000 compared to the same month in 2024.

For hospitality operators, these figures present a complex picture. While the broader labour market cooling might suggest greater availability of workers, the sector continues to face unique recruitment and retention challenges that have persisted since the pandemic.

The ONS data shows UK job vacancies fell by 10,000 (1.4%) in the quarter, dropping to 728,000 between June and August 2025. This downward trend in available positions reflects what economists describe as a normalisation of the labour market following the unprecedented disruption of recent years.

Liz McKeown, ONS Director of Economic Statistics, noted that firms reported fewer job openings in the latest period, though she emphasised that wage growth remains “strong by historic standards” even as it moderates in cash terms when bonuses are excluded.

The cooling labour market comes at a critical time for pub, bar and restaurant operators who have been rebuilding their workforce following pandemic-era disruptions. Many venues have struggled with high staff turnover and difficulty filling both front-of-house and kitchen positions.

Last month  research from insight & research consultancy revealed that a total of 98,746 sites were operating at the end of June—374 fewer than at the start of the year, equating to 62 net closures per month, or two per day. In the context of the overall size of the market, Britain’s number of licensed premises fell by 0.4% in the first six months of 2025.

The closures mean the sector is now 14.2% smaller (net) than it was at the start of the COVID-19 pandemic in March 2020, having recorded more than 16,000 net closures in the ensuing five-year period.

The ONS has cautioned that labour force survey estimates continue to show increased volatility, particularly for data from mid-2023 onwards. Officials recommend interpreting the figures alongside other employment indicators including workforce jobs data and PAYE information.

The August payroll figure of 30.3 million employees is described as provisional and likely to be revised when additional data becomes available next month.

For hospitality business owners, these employment trends underscore the importance of robust recruitment strategies and competitive employment packages. While a softer labour market might eventually ease some hiring pressures, the sector’s specific challenges are likely to persist in the near term.

The data also highlights the ongoing need for the industry to focus on staff retention and career development opportunities to build sustainable workforces in an evolving employment landscape.