By the end of 2025, unemployment in the UK rose to the highest rate in almost five years, reaching 5.2% in the final quarter of the year. Britain’s labour market is showing increasing strain as businesses struggle to battle rising operational costs, less demand, and ongoing economic uncertainty. Meanwhile, the Labour government struggles to shake off the legacy of fourteen year of Conservative administrations.
The outlook for the UK economy remains modest at best and this present challengers for employers. The challenges facing businesses have led to many employers cutting their workforce or even going into insolvency altogether.
New data sourced by the firm Liquidation Centre has revealed that 2025 was the most severe year for redundancy warnings since 2020, with 315,605 jobs flagged for potential redundancy and redundancy payouts totalling £477,709,323 in 2025.
The data is based on figures provided by the UK government’s Insolvency Service and then analysed to determine how many employers made or planned redundancies and the expected redundancy payout for proposed dismissals from 2020 to 2025.
The number of HR1 advance notice of redundancy forms issued in February 2026 (430) is almost identical to February 2009 (433), shortly before the peak of the 2008-2009 recession, highlighting the scale of pressure currently facing the UK labour market.
According to Richard Hunt, Director at Liquidation Centre (in a statement sent to Digital Journal): “Redundancies are happening at a rapid pace in the UK as the economy continues to change and industries adapt. including automation and AI. Unlike in 2020, when redundancies were largely driven by a single crisis, the rise in redundancy warnings in 2025 appears to reflect more ongoing pressures on employers. These include rising operating costs, wage inflation, and policy changes such as higher employer National Insurance contributions.”
Outlook for 2026
In the first two months of 2026, 736 employers filed for proposed redundancies, putting 56,396 jobs at risk of redundancy, compared to the first two months of 2025, which were 51,905 redundancy warnings, a 8.65% increase in warnings.
It is estimated that 2026 could see as many as 327,227 redundancies, with 11,622 more jobs lost than in 2025. This marks a forecasted 3.7% increase from 2025; however, this is less severe than that of 2024-2025, which saw an 18.1% increase in redundancies.
Hunt assesses this shift as indicating: “2026 is already shaping up to be an unfortunate record year for redundancies. Increased competition, cost of living, taxation, and wage inflation are all key contributing factors. Global political uncertainty also often has a knock-on effect on businesses around the world, and the UK is no exception. Disrupted trade and supply chains, rising operating costs, and poor business confidence are likely to add further strain for businesses.”