UK workforce outlook to May 2028: selective hiring and work redesign will matter more than vacancy growth

The thesis: the next phase is selective normalisation, not a hiring boom

**Forecast horizon: November 2026 to May 2028.** The most credible base case is a gradual move from broad recruitment restraint towards selective hiring. That does not amount to a return to a uniformly tight labour market. It means employers should find it easier to recruit for some generalist roles while continuing to compete for people who combine sector knowledge with technical, analytical, customer-facing or workflow-improvement capability.

The starting point remains subdued. The ONS recorded 691,000 vacancies in July to September 2026, down 2.9% on the preceding quarter and 5.1% year on year. It also reported that smaller businesses continued to identify higher labour costs as a factor holding back recruitment. Regular pay growth was 3.7% in June to August, while the number of payrolled employees was lower than a year earlier. Taken together, those measures describe restrained net hiring rather than an absence of work or unmet operational demand (Office for National Statistics, 2026) ↗ ↗.

The forward-looking picture is less negative than the vacancy series alone suggests. The REC’s September survey recorded a second consecutive monthly rise in permanent placements, with its permanent-appointments index moving above the neutral 50 mark for the first time since September 2022. Yet vacancies continued to fall and candidate availability rose (Recruitment & Employment Confederation, 2026) ↗. This combination is consistent with employers filling essential posts from a less constrained candidate pool while deferring discretionary additions.

For leaders, the question is therefore no longer simply whether recruitment is possible. It is which roles should remain a hiring problem, which tasks should be redesigned, and where an additional person will release measurable capacity or protect service quality.

Why vacancy totals are an incomplete guide to workforce demand

Vacancies are indispensable, but they measure active recruitment rather than the full stock of work an organisation is struggling to complete. They do not capture tasks absorbed through overtime, temporary labour, manager stretch, delayed service, internal redeployment or technology. Nor do they show whether a business has stopped advertising because it cannot make the economics of a role work.

The ONS reported 2.5 unemployed people for every vacancy in May to July 2026, unchanged on the year. That points to a looser aggregate market than at the post-pandemic peak, but it does not guarantee a match between people seeking work and the location, hours, experience or skills employers require (Office for National Statistics, 2026) ↗. This distinction matters particularly for high-street firms, care and hospitality operators, small manufacturers and local service businesses: a larger pool of applicants does not automatically solve unsocial-hours, transport, supervisory or retention constraints.

Pay data reinforce the need for caution. Private-sector regular earnings growth was 3.0% in the latest ONS release, compared with 6.3% in the public sector, although timing effects make simple comparisons unreliable. The Bank of England’s Agents reported average 2026 settlements of around 3.6%, with early expectations for broadly similar settlements in 2027. They also described modest spare capacity, recruitment difficulties below normal and slightly firmer employment intentions (Office for National Statistics, 2026; Bank of England, 2026) ↗ ↗.

**Sanctuary interpretation:** aggregate pay pressure is easing, but recruitment will not feel uniformly easier. Employers should track starting pay, offer acceptance, time-to-fill and regretted turnover by occupation or location, rather than relying on an organisation-wide settlement assumption.

Labour-cost pressure makes work design a management issue

The April 2027 National Living Wage rise is a direct test of management capability. The rate for workers aged 21 and over is set to rise by 3.9% to £13.21 an hour, while the rate for 18- to 20-year-olds will rise to £11.27. The Government expects around 2.3 million workers to benefit (GOV.UK, 2026) ↗.

For labour-intensive employers, the effect extends beyond the hourly rate. Higher wage floors can compress pay differentials, increase the cost of supervision and make poor scheduling, avoidable rework and unnecessary hand-offs more visible. Businesses with limited ability to pass costs to customers may respond by reducing vacancies or tightening hours. The ONS evidence on smaller firms’ labour-cost concerns suggests this is already part of the hiring calculation (Office for National Statistics, 2026) ↗.

A blanket recruitment freeze is an understandable response, but it can worsen the underlying problem where an unfilled role protects statutory compliance, removes a bottleneck, improves conversion or gives managers capacity to improve operations. A more disciplined approach is to classify roles into three cases: continuity-critical roles; roles that release capacity or margin; and roles where the task can first be simplified, automated or consolidated.

That framework is especially relevant to SMEs. Their route through cost pressure is not a vague instruction to do more with less. It is a small number of explicit decisions about workflow, job scope, pricing, scheduling and managerial accountability before costs force rushed decisions.

AI will change tasks faster than it removes occupations

AI adoption is now material enough to be a workforce-management issue. The Government’s 2026 survey found that 32% of UK businesses used at least one AI technology, compared with 16% in 2025. Use was most prevalent in information and communication, real estate, and business services and administration; administration, marketing and IT were the most common functional applications (GOV.UK, 2026) ↗.

The same evidence argues against a simple replacement narrative. Among businesses using or planning to use AI, 71% identified workforce-productivity improvement as a benefit, but only 14% considered AI highly or critically important to operations. Benefits were generally incremental and centred on automation and workflow optimisation. Limited skills, expertise or knowledge constrained 67% of adopters, alongside concerns about accuracy, bias, privacy and security (GOV.UK, 2026) ↗.

The likely 6–18 month effect is therefore augmentation before substitution: drafting, triage, scheduling, case preparation, documentation, analysis and quality assurance may change before entire occupations disappear. This still has significant workforce implications. If routine work is completed faster, an employer may need fewer junior hires for basic production tasks unless it deliberately redirects capacity into supervised learning, customer service, quality improvement or growth.

The key management choice is what happens to time saved. Without a baseline for task time, error rates, rework, customer outcomes and risk, AI can make individuals appear more efficient without improving organisational productivity. A credible business case defines the workflow, controls data and escalation risks, measures outcomes, and decides in advance whether released capacity will become better service, additional volume, development time or lower cost.

Scarcity will sit in capability combinations, not in a generic ‘AI skill’

Skills England cautions that future employment projections are broad directional indicators rather than precise forecasts. Its underlying implication is nevertheless useful: workers need communication, critical-thinking and analytical capabilities to use AI effectively, while employers and the skills system need stronger routes for continuing upskilling and reskilling (GOV.UK, 2026) ↗.

This points to a more practical hiring hypothesis than the claim that every employee needs to become an AI specialist. The emerging premium is likely to sit at intersections of domain knowledge, judgement and process capability: a housing adviser able to use AI-supported case preparation responsibly; an operations manager able to translate demand data into staffing choices; or an administrator able to improve customer and compliance workflows without surrendering accountability.

There is a trade-off. External recruitment can secure scarce expertise quickly, but may concentrate know-how in a small number of specialists and leave adoption detached from daily work. Internal development is slower, but embeds capability in real processes and preserves institutional knowledge. For many organisations, the more resilient model is a limited number of specialist hires or partners alongside broad, role-based development, clear escalation routes and managers accountable for redesigning work.

Scenarios to May 2028: conditions that would change the plan

**Base case — selective normalisation.** Vacancy demand stabilises during 2027, with hiring improving first where roles support revenue, delivery resilience, infrastructure, technology or specialist services. The Bank of England’s July central projection anticipated private-sector regular pay growth of around 3.1% in 2027 and 2028, unemployment around 5.3% in 2027 and 5.2% in 2028, and a gradual improvement in productivity per worker. These are conditional macroeconomic projections, not a company-level hiring forecast (Bank of England, 2026) ↗.

**Upside case — investment becomes usable capacity.** Employers translate technology spending into better processes and customer capacity rather than isolated efficiency gains. The Bank’s Agents have reported stronger activity in technology-related and export-oriented areas, albeit unevenly. If this feeds through to sustained investment, demand could strengthen for implementation, supervisory, technical and commercially oriented roles (Bank of England, 2026) ↗.

**Downside case — weak demand and costs reinforce restraint.** Consumer-facing and SME employers could respond to fragile demand, borrowing and energy pressures, and higher wage floors by suppressing vacancies, narrowing entry routes or relying more heavily on contingent labour. The Bank’s adverse scenario illustrates the risk that weaker growth, higher unemployment and higher inflation can occur together rather than neatly offset one another (Bank of England, 2026) ↗.

The practical value of scenarios is not to create false precision. It is to identify decisions that remain sensible across outcomes: short planning cycles, role-specific hiring cases, retention of scarce capability and investment in work redesign that improves quality as well as cost.

What employers should do now: manage a workforce portfolio

A useful 90-day response has four components.

**First, map roles and tasks rather than relying on job titles.** Identify continuity-critical work, revenue and bottleneck roles, tasks that require human judgement, and work that can be simplified or redesigned. This avoids treating every vacancy as an identical cost decision.

**Second, separate pay decisions.** Budget distinctly for broad pay settlement, statutory wage-floor exposure, scarce-skill premiums and retention risks. A differentiated approach is more sustainable than either a broad pay response that ignores affordability or a blanket freeze that loses capability.

**Third, turn AI use into governed workflow change.** Select two or three high-volume processes, establish quality, data-handling and escalation controls, train managers as well as users, and measure whether time saved becomes improved service, capacity, quality or revenue. Reported AI budget intentions are substantial: 65% of surveyed businesses expected AI-related budgets to increase, principally for off-the-shelf applications, task automation and embedding AI in existing systems. But intended spend is not evidence of realised productivity (GOV.UK, 2026) ↗.

**Fourth, protect future capability.** Where technology reduces routine junior work, employers should replace passive entry roles with supervised progression routes. Otherwise, an organisation may alleviate immediate administrative pressure while weakening its future talent pipeline and local employability contribution.

The workforce opportunity through May 2028 is not indiscriminate headcount reduction or expansion. It is more deliberate allocation: recruit where human capability releases value, build practical digital and managerial foundations, and redesign work before cost pressure redesigns it badly.