Despite hiring problems easing, fewer firms are expecting to grow their workforce in early 2026, according to the latest data from the British Chambers of Commerce (BCC).

The BCC’s Quarterly Recruitment Outlook shows less than a quarter (23%) of surveyed businesses are planning to increase the size of their workforce in the next three months, down slightly from 25% in Q3 survey. Meanwhile 63% expect their staffing levels to remain the same, 14% are expecting to reduce their workforce.

The research shows recruitment pressures eased at the end of last year. Of those businesses who attempted to recruit in Q4, 70% said they experienced difficulties, compared with 75% in the previous quarter.

The research for Q4 was carried out between 10 November and 8 December, with more than 4,600 businesses across the UK (91% of whom are SMEs) responding.

The hiring picture is slightly different across sectors. The construction sector is the most vulnerable to recruitment difficulties, with 78% of businesses reporting problems. 75% of manufacturing firms said they experienced hiring difficulties in Q4. Meanwhile, in the retail sector the figure was 63% of businesses.

Only a fifth (21%) of firms increased the size of their workforce in Q4, with half of businesses (62%) saying their staffing levels remained the same. 17% of businesses said they’d cut the size of their workforce.

Labour costs remain the biggest cost pressure for businesses, cited by 72% of businesses, the same level as Q3. But again, there are big sectoral variations, with that pressure highest in hospitality (82%) and lowest in retail (66%).

Faced with those rising costs, firms are struggling to invest in staff training. Most businesses (57%) reported that their investment in workforce development remained unchanged over the past three months.  Only 21% said they increased training investment in Q4, 22% made cuts.

Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce, said:

“As more firms struggle under the weight of rising cost pressures, we are beginning to see an adverse impact on the jobs market.

“Fewer businesses are taking on new staff, while others are having to let staff go.  It’s reflected nationally in the rise in unemployment, particularly for young people.

“Unsustainable cost increases mean firms also have less budget to invest in training. Our survey shows that more than a fifth have had to cut their training budget, at a time when the economy is being held back by pervasive skills shortages.

“High taxes and rising wage bills present huge barriers to investment and growth. On top of this, the cost burden of the Employment Rights Act – which the government continues to underestimate – will create further problems.

“To stimulate the economy, the government must now look for every opportunity to minimise business costs, support employers and provide a compelling blueprint for economic growth.”