By Dustin Burgess, Senior Vice President of Strategic Advisory at Magnit
As the UK labour market stands at a transformative crossroads, organisations face unprecedented challenges and opportunities in shaping their workforce strategies for 2025. We’re experiencing a complex, evolving market where the relationship between candidates and organisations continues to shift dramatically. As skill demands evolve and workforce expectations change, organisations that maintain a deep understanding of these market dynamics while adapting to new employment regulations, will emerge as leaders in 2025.
Based on Magnit’s recent Autumn/Winter 2024 UK Labour Market Report, we anticipate several key trends shaping the market over the next six to 12 months.
AI Revolution Reshaping the Workforce
The rapid adoption of AI and automation will create new opportunities, particularly in tech-driven sectors. The UK’s position as Europe’s AI powerhouse continues to strengthen, with the IT & telecommunications sector leading adoption at 29.5% and predicted to add 320,000 new roles to support AI technologies. This transformation extends beyond the tech sector, affecting every industry vertical to some degree – the retail sector for example, with just 11.5% adoption, is set to reduce its workforce by 240,000 due to automation.
Employers should focus on reskilling and upskilling their current workforce, preparing them for the rising demand in data analysis, machine learning and generative AI. Training programmes will be crucial to bridging skill gaps and ensuring organisational resilience.
Onshoring Momentum to Drive Domestic Skills Investment
Onshoring and nearshoring will gain momentum as businesses seek to reduce global supply chain risks. This shift will require investment in local talent and infrastructure, and employers should proactively adjust their recruitment strategies to source more domestic workers. The construction and manufacturing sectors are leading a significant onshoring trend, with Western Europe’s filled contingent engagements more than doubling from 6.8% to 13.9% of the global total. The UK accounts for two-thirds of this volume, demonstrating strong domestic growth potential.
The changing landscape of global business operations and the decline in the original conditions that led to offshoring has driven companies to bring work back to the UK. This creates both opportunities and challenges for workforce development and skills training.
New Employment Legislation to Transform Working Practices
The implementation of new employment laws under the Labour government is set to fundamentally alter the UK’s working practices. Key changes include the introduction of Day-One Rights removing the two-year qualifying period for unfair dismissal protection, and guaranteed hours after a specified employment period to address the exploitation of zero-hours contracts. These upcoming changes will likely increase the cost of hiring temporary workers but will significantly enhance employment protections. Flexibility and workforce/demand planning may also be impacted for employers within some sectors, especially those which are heavy users of zero-hours contract and/or operate shift patterns.
Organisations have a unique opportunity to reassess their practices, strengthen their compliance frameworks, and enhance their value proposition to employees. Those that adopt a forward-thinking stance will be better positioned to thrive in the new regulatory terrain.
Specialised Skills Shortages Drive Competition
Economic uncertainty and political shifts will continue to influence recruitment dynamics and employers will face challenges in specialised, high-demand roles like IT, cybersecurity and project management. The market faces intense competition for specialists in cybersecurity, AI implementation, and digital transformation. Currently, 25% of IT project managers and cybersecurity engineers change jobs annually – nearly double the national average of 15% – indicating a highly mobile talent pool.
The ongoing talent shortage has given workers new career advantages and flexibility. Rather than just being job seekers, they’re now job choosers. These roles will remain competitive, requiring strong retention strategies, such as attractive compensation packages and flexible working.
Return-to-office mandates that fail to account for worker preferences and the local talent landscape stand to exacerbate growing regional skills gaps going forward. Blind prioritisation of in-office presence to save the bottom line over consideration of the flexibility preferences and available skills among local talent may alienate top candidates and make the competition for already scarce talent that much more difficult. To avoid this, companies must invest in robust job-posting data, AI-driven technology, and job taxonomy expertise when building their hiring strategies for 2025.
Enhancing Learning and Development (L&D)
With 9% of UK workers now listing analytical and data analysis skills in their profiles – more than any other skill – companies must adapt their training programmes to meet this growing demand for data-savvy professionals. Other notable skill trends include significant increases in demand for content strategy and business intelligence (both +8% YoY) and SharePoint Online (+4% YoY).
Organisations that think holistically, bringing contingent workers into their overall workforce planning, will set themselves up for success. The key will be finding a delicate balance between controlling costs and remaining competitive in a rapidly evolving market.
Organisations must adopt an integrated approach to these challenges, combining technological innovation with human-centric policies. Success in 2025 will require careful orchestration of AI integration, regulatory compliance, and talent development strategies, all while maintaining operational agility and workforce satisfaction.
