By William Schomberg and Andy Bruce
LONDON, May 19 (Reuters) – Britain’s employers reined in their hiring and posted fewer job vacancies in April, according to data published on Tuesday which added to signs of the impact of the Iran war on the economy.
Early payroll data from the tax office – which are prone to revision, especially around the start of the tax year in April – showed a heavy fall of 100,000 in the month from March.
The Office for National Statistics said the drop was the biggest since May 2020, at the start of the COVID-19 pandemic, but stressed that the figures were likely to be revised.
The data showed a weakening picture since the end of 2025 with estimates for the previous four months revised down.
ONS Director of Economic Statistics Liz McKeown said lower-paying sectors such as hospitality and retail saw some of the largest falls in payroll numbers and vacancies in the most recent data and over the last year.
Employers have complained that higher payroll taxes and a government reform to give workers more rights have made hiring more expensive for them.
“The latest figures point to a labour market feeling the strain,” Jack Kennedy, senior economist at jobs platform Indeed, said.
“The UK economy saw surprisingly robust growth in Q1, but the Iran conflict is set to weigh heavily over coming quarters, further constraining hiring demand. A volatile domestic political backdrop adds uncertainty that businesses could do without,” he said.
Prime Minister Keir Starmer has come under heavy criticism from within the governing Labour Party after it suffered heavy losses in local and regional elections on May 7.
Starmer looks set to be challenged as Labour’s leader, raising questions about the direction of Britain’s government at a time when the Iran war is also hitting the economy.
Surveys of businesses in April showed firms were concerned about the economic outlook and inflationary pressures caused by the conflict and they planned to cut hiring.
Tuesday’s ONS data showed vacancies fell to 705,000 in the three months to April, down from 712,000 in the first quarter of 2026 and the lowest number since the three months to February 2021.
The figures also showed growth in British wages, excluding bonuses, stood at 3.4% in the first three months of 2026 compared with the same period last year, in line with the median estimate from a Reuters poll of economists.
Adjusting for inflation, average weekly earnings excluding bonuses grew by only 0.3% annually in the three months to March – the weakest growth since the three months to July 2023.
The Bank of England has been monitoring wage growth closely as it tries to assess the level of inflation pressure in the economy.
A surge in energy prices since the start of the Iran war has added a new inflation concern for the central bank. However, several BoE policymakers say they believe the wage growth slowdown since early 2025 is likely to continue due to the war’s impact on hiring by employers and on the broader economy.
Britain’s unemployment rate – which is derived from a survey that the ONS is still working to improve – ticked up to 5.0% in the first quarter of 2026 from 4.9% in the three months to February.
While the number of employed people rose by 148,000 in the first quarter – far more than forecast – the growth was entirely down to rising numbers of self-employed. The number of employees dropped by 53,000.
(Writing by William Schomberg; Editing by Sarah Young, Andy Bruce and Andrew Heavens)
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