Recruitment plans are being put on hold as companies tighten their belts following recent tax and wage rises.

Vacancies across the UK fell by 63,000 between March and May while the unemployment rate ticked up to 4.6% from 4.5%, the highest since July 2021.

Average wage growth, excluding bonuses was 5.2% in the three months to April, down from 5.5%.

The data from the Office for National Statistics follows the rise in National Insurance Contributions paid by employers increased while a rise in the minimum wage came into force.

“There continues to be a weakening in the labour market,” said Liz McKeown, director of econonic statistics at the ONS, adding that there had been a noticeable drop in the number of people on payrolls.

The unemployment rate in Scotland was estimated at 4.2%, up 0.4% over the quarter.

Jane Gratton, deputy director of public policy at the British Chambers of Commerce said:   “The increase in employment costs for business appears to be starting to bite with today’s data showing a rise in unemployment. 

“This year’s steep increases in national insurance and the national living wage have undoubtedly delivered a shock to businesses.  

“Firms are now freezing recruitment plans, while others are being forced to reduce headcount. At the same time, wage growth continues to outpace inflation, adding further cost pressures for firms already facing rising overheads. Employment costs and pervasive skills shortages are a massive challenge for business, presenting big risks to investment and growth.”  

She said the £5bn cost associated with the employment rights bill poses a further threat to firms’ investment plans.

“Without further amendment, the legislation will add even more to employers’ costs.

Ben Harrison, director of the Work Foundation at Lancaster University, said “Today’s data underscores the importance of Government committing the investment and funding required to support more people into the labour market in the Spending Review.

“It’s vital that alongside an extra £1 billion for additional employment support programmes, the Government reverses plans to cut nearly £5 billion of welfare spending.

“These cuts stand to make it much more difficult for those with long-term health conditions to access sustainable employment in the future.”