UK businesses have tamped down on new hirings across the board. But it's still the younger ones who are facing the brunt of this. Image Credit: Shutterstock

London: Jobs for Britain’s university graduates are drying up at double the pace of the rest of the labor market, spurring concerns that businesses aren’t investing enough in their future workforces.

The number of vacancies for graduates fell 30.2 per cent from a year ago in February, according to data from the jobs search engine Adzuna. That compares with a 15.1 per cent drop across the whole economy.

“Those new entrants are fundamental to the success of the economy and to the future labor market,” said Kate Shoesmith, deputy CEO of the Recruitment & Employment Confederation, an industry group. “Businesses need to be thinking about how, in this type of market, they are bringing new entrants in, and what their long-term workforce strategy is.”

The drop in opportunities for graduates is a symptom of a loosening labor market, with employers curtailing hiring after the economy tipped into recession last year. It reflects efforts by the Bank of England to rein in inflationary forces with the highest interest rates in 16 years, which has helped cool upward pressure on prices coming from rapid wage growth.

Less of hiring

A separate survey by REC showed demand for staff fell for a fifth month to a level that was near a 37-month low. The industry group’s measure of starting salary growth rose at its slowest pace in three years. It also showed more candidates looking for jobs.

“Persistent economic uncertainty has led to many business leaders delaying major investment decisions,” said John Holt, a senior partner at KPMG, which contributed to the REC survey.

For young people, the most alarming trend is a deterioration in the number of jobs for those just starting out in a career. Those departing university are facing a disproportionately tough market. The Adzuna data adds to figures from Reed Recruitment last year that showed graduates facing the worst market in years.

The result is subsiding pay pressures, a trend embraced by the Bank of England and lamented by graduates. New postings across the job market reaped salaries 3 per cent higher than a year before, according to Adzuna data. That’s the lowest in three years.

Across graduate postings, wage growth was flat in 2024, with employers backing away from the steep raises they had to offer just after the pandemic to draw in the staff they needed.

The result is that fewer young people are working, reducing the pool of available labor. More than 500,000 people aged 16 to 24 years were economically inactive - not in education, employment, or training - between October and December 2023. While that’s less than at the post-pandemic peak between July and September last year, the figure remains 7.5 per cent higher than a year ago.

Employers’ aversion to hiring entry-level candidates is driven by lower confidence in the outlook, according to a REC survey showing sentiment toward hiring and investment decisions at a 12-month low. Shoesmith said lower interest rates would help give companies ‘wiggle room’ in their budgets to hire more.

“Giving an opportunity to a new starter can be deemed a risk,” said Shoesmith, “and many employers just don’t have that economic support right now.”