Written by Martin Sims, distribution director of Molo, a buy-to-let lender
The unemployment picture in the UK does not look great. There’s significant deterioration in the jobs market: it weakened in February and again in March. The triggers were an increase in the national living wage, anticipation of worker rights’ legislation and the introduction of higher employers’ national insurance contributions, as laid out in the October Budget.
Payrolled employment fell by 8,000 between January and February, according to tax data published on Tuesday by the Office for National Statistics. March’s fall was significantly worse with 78,000 fewer people in payrolled employment. If these figures aren’t revised, this will be the biggest fall in employment since May 2020. There’s growing slack in the labour market.
On top of this, the estimated number of vacancies in the UK fell by 26,000 on the quarter, to 781,000 in January to March 2025; this was the 33rd consecutive quarterly decline. Vacancies were 15,000 below their January to March 2020 level. and fell below pre-pandemic levels for the first time since the spring of 2021.
And jobs growth could be hit further with the recent increase in uncertainty due to the chaotic way US tariff policy is being set.
This is potentially damaging for the UK’s landlords. High unemployment can lead to reduced demand and even rental defaults. If tenants experience financial difficulties, they may struggle to pay rent, increasing the likelihood of late payments or vacancies.
But brokers can reassure their landlord clients: the picture is much more nuanced than the raw data suggests.
First, the Bank of England is watching the labour market carefully. It is paying close attention to the effect the national insurance rise and the national living wage increase are set to have on employment. The Bank is also conscious of the economic impact of US tariffs. This should mean a cut in rates this week – with another couple of rate cuts by the end of the year.
Second, while the private sector is not growing, the public sector is. Back in January, figures from the ONS showed the size of the public sector had swelled to 6.1 million employees since the start of 2019, meaning the state has hired an extra 600,000 staff since the pandemic. The number of staff in the public sector is now at the highest level since early 2012.
Third, wage growth remained strong. Earnings stand out as the labour market indicator that is in no way going soft – the weakness elsewhere in the labour market has not yet fed into weaker earnings growth. Those in work are doing OK.
Fourth, the government plans to focus on getting welfare recipients back into work. By way of example, the government has committed to a record £1 billion annually to provide tailored personalised employment support for sick and disabled people. This includes deploying 1,000 work coaches in 2025/26 to support around 65,000 claimants with intensive, voluntary assistance, such as CV writing and interview preparation.
Fifth, if Rachel Reeves is serious about the UK becoming “a defence industrial superpower”, more jobs may be created there. It’s certainly possible, given the European Commission and UK government are moving closer to a defence deal that will open the door to British arms firms being able to reap bigger potential rewards from a £129 billion EU fund.
Finally, job creation is not constant across the whole of the UK. The unemployment rate in London sits at 6.5 per cent, it’s only 1.5 per cent in Northern Ireland. On the one hand, the lowest employment rate in the UK is in the North East (69.7 per cent) while the highest employment rate is in the South West (79.9 per cent).
Brokers should offer anxious landlords, unnerved by labour market news, a balanced perspective on the UK’s employment landscape. While rising unemployment, falling vacancies, and economic uncertainties from US tariffs pose some risk to rental demand and tenant affordability, there are factors that mitigate these concerns. The Bank of England’s likely interest rate cuts, comparative public sector headcount growth, sustained earnings growth, and government initiatives will all provide a degree of stability. And regional variations as well as potential job creation in sectors like defence highlight opportunities for landlords in specific markets. By emphasising these subtle variations and monitoring local trends, intermediaries can help landlords successfully navigate the market, ensuring well informed investment decisions that take account of risks and ensure resilience in the rental sector.
