The UK labour market is under immense pressure and the latest government figures paint a stark picture. PAYE data shows a fall of 125,000 employees from May to July 2025, bringing them below pre-pandemic levels. It isn’t a surprise that recent insights over the past few months show a steep decline in hiring and an accelerated rate of job cutting.
The recent ‘ping pong’ in the House of Commons over the Employment Rights Bill has also brought into sharp relief the anxieties many organisation have about its potential impact. Opposition members argued that the government’s refusal to adopt any of the Lords’ amendments, particularly around unfair dismissal, could “create generation jobless”, as employers may become more reluctant to hire younger, less experienced workers over their more proven peers.
Downsizing trends and statistics
In December 2024, not long after the government announced their budget, the guardian reported that UK businesses were cutting staff at the fastest rate since 2021.
A survey by CIPD, as highlighted by the BBC, also found that over a third of businesses were planning to reduce their headcount, through redundancies or by hiring fewer workers.
In September of this year, this trend continued. People Management reported that during the summer months, UK businesses cut jobs at the fastest pace in more than four years.
Downsizing is no longer just a reaction to a difficult quarter. It’s unfortunately become an all-too-common reality for organisations grappling with inflation, new technologies and changing workforce demographics.
Leaders who handle redundancies with transparency and care are more likely to retain trust, protect critical skills and rebuild quickly.
Downsizing: The state of the UK
UK employers are approaching downsizing in today’s volatile market as a necessity to extenuating circumstances, rather than as a consequence of a poor fiscal performance.
Yet, despite the challenging economic condition, there is also an opportunity to take a more human-centred approach to downsizing, using redeployment, reskilling and fair severance to meet business needs while supporting people through change.
Strategies need to evolve and companies need to actively reassess and update their practices to stay effective in a dynamic labour market.
Downsizing actions taken in the last 12 months
UK organisations have taken downsizing actions in the past 12 months, including:
- Cutting jobs: PMI data reports 50,000 private sector jobs being cut in the three months to September;
- Initiating hiring freezes: Overall vacancies continue to decline throughout August and September;
- In February’s CIPD Labour Market Outlook, 32% of surveyed employers planned to reduce their workforce through redundancies or recruiting fewer workers.
Anticipated downsizing actions going forward
Going forward, UK organisations anticipate further downsizing and cost-reduction actions, such as:
- Reducing employee outgoings: 52% of organisations state they’re delaying pay rises and 13% of SMEs contribute only the statutory minimum to pensions;
- 61% of professionals report their employer uses salary sacrifice schemes to save costs;
- A report by the British Standards Institution (BSI) found that 41% of business leaders said AI was enabling headcount reductions, and a third reported their organisation explores AI solutions before considering hiring a human, impacting junior employees most.
The influence of AI on employment and hiring strategies is likely to intensify. In November 2025, HR Grapevine reported that the CIPD’s latest Labour Market Outlook found that 17% (one in six) of employers anticipate that AI will reduce their workforce over the next year, primarily affecting junior positions.
Changing approaches to downsizing
For HR and talent leaders, the current employment landscape is a call to adopt a more strategic approach. Rather than focusing solely on immediate cost reductions, organisations must consider the long-term impact on employee trust, retention of critical skills, and reputation. This involves:
- Anticipating new workforce pressures such as technology adoption, hybrid working, and automation-driven redeployments.
- Empowering managers with the knowledge and support to handle sensitive conversations confidently and consistently.
- Embedding flexibility into workforce planning, so transitions can be managed smoothly without unnecessary disruption.
Approaching downsizing strategically positions organisations to weather economic uncertainty while reinforcing a culture of fairness and transparency.
Supporting organisations through change
Even the best strategies will falter without practical support. The human side of redundancy and how employees experience change is increasingly recognised as a critical determinant of business outcomes.
Organisations that provide structured guidance, manager coaching, and robust redeployment frameworks are better able to:
- Maintain engagement among remaining staff, helping to sustain productivity and morale during periods of change.
- Protect their brand and reputation in the market, making it easier to attract and retain top talent in the future;
- Deliver fair and consistent treatment to those leaving the business, significantly reducing the likelihood of legal challenges, including unfair dismissal employment tribunals.
By providing tools, coaching, and learning programmes, organisations can reduce risk, build confidence, and manage change more thoughtfully.
Outplacement support: When redundancies are unavoidable
Despite best efforts and even with the most careful planning, there are times when redundancies cannot be avoided. In these moments, the way organisations support employees can make a significant difference to those leaving and those who remain.
Outplacement support provides a structured, human-centred approach to career transition. It gives individuals the guidance, tools and confidence to navigate change, whether that’s exploring new roles, developing skills, or considering a different career direction.
Flexible outplacement and career transition support enable employees to access the advice that’s most relevant to them, from one-to-one coaching and virtual workshops to digital learning resources and financial guidance.
Handled thoughtfully, outplacement supports people to move forward with purpose and confidence, preserve trust, and maintain your organisation’s reputation for fairness and care.
Preparing for workforce change now
The future of workforce transitions in the UK will be shaped by economic pressures, sweeping legislative updates, evolving technology, and changing employee expectations.
Organisations that continuously review and adapt their approaches by embedding human-centred practices into redeployment, reskilling, and severance processes will be best placed to retain critical talent, sustain engagement, and protect their reputation.
Handled thoughtfully, downsizing and workforce transformation can go beyond short-term cost management. They become opportunities to reinforce organisational values, strengthen trust, and build resilience for the challenges ahead.
Empowering People Group’s expertise and suite of services help HR leaders and managers navigate complex workforce transitions, ensure compliance with employment law, and provide career transition and outplacement services to support employees in taking their next steps. Get in touch to find out more.
