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ALP Survey Finds Stabilising Labour Supply but Intensifying Financial Pressure

Labour availability across the UK supply chain has stabilised, but businesses now face a different crisis: rapidly rising labour costs, deteriorating worker quality and tightening legislative pressures, according to the latest ALP Labour Supply Chain Survey.

The October 2025 survey, comprising 194 respondents across labour providers and employers, reveals deepening concerns driven by National Insurance increases and the forthcoming Employment Rights Bill.

Labour Costs Surge to Their Highest Level in Two Years

A striking 73% of employers report increased labour costs in the past six months – up sharply from 54% in October 2024 and 65% in May 2025.

The impact of rising Employers’ National Insurance (NI) is clear:

  • 41% expect it to result in lower wage increases
  • 18% say recruitment has already reduced
  • 16% plan to accelerate automation
  • 16% will freeze recruitment
  • 15% will cut benefits

Taken together, these figures underline the widespread expectation that NI increases will damage workforce prospects and constrain investment.

Labour Providers Report Severe Margin Compression

Labour providers show similar strain:

  • 73% report declining margins, up from 58% in October 2024 and 70% in May 2025
  • 75% say that recruitment costs have increased, amplifying the squeeze on operating margins

Attempts to recover cost increases remain ineffective:

  • Only 11% of labour providers say client rate increases cover their rising costs – down from 19% in May 2025.
  • 29% attempted to raise rates but saw most clients refuse

Worker Quality Declines for a Third Consecutive Survey

Alongside financial pressures, a growing issue flagged across the sector is the deterioration in worker reliability, productivity and English language skills:

  • 31% of labour providers report declining worker quality – the highest level since 2021
  • Only 10% report any improvement, unchanged from October 2024.

This trend, occurring even as overall labour availability stabilises, suggests that the challenge is now quality, not quantity.

Labour Availability Improves but Structural Issues Persist

The survey highlights a continued improvement in labour providers’ ability to supply workers:

  • 35% met all client demand – up from 31% in May 2025, though slightly below 40% in May 2024.
  • 53% short-supplied by only 0 – 10%, matching May 2025 and indicating consistent near-full coverage.

Employers likewise report broad improvements in labour availability. However, intermittent shortages are rising in several categories:

  • Unskilled temporary, seasonal and agency workers: 34%
  • Skilled workers: 24%
  • Highly skilled workers: 25%

This mixed picture shows that while the general labour situation is improving, shortages in critical roles remain persistent.

Significant Shifts in Recruiting and Worker Attraction Strategies

The data reveals meaningful variance in recruitment strategies compared with previous years:

  • 72% of labour providers say that encouraging word of mouth helps them to source additional workers, down from 80% in May 2025 but far higher than 57% in May 2024. This remains the single most effective sourcing method
  • Using higher pay rates dropped sharply from 41% in May 2025 to 27% in October 2025, suggesting employers have less capacity to raise wages
  • Employers reporting efforts to improve retention reached 35%, the highest since tracking began

Labour providers consistently identify the same priorities for employers seeking to attract workers:

  • 51% highlight the need for more regular hours
  • 71% say improving pay and terms is essential,
  • 55% emphasise creating a welcoming workplace culture,

Government Policy Is Deepening Concern Across the Sector

A record level of concern surrounds the Government’s Plan to Make Work Pay:

  • 61% of employers and 58% of labour providers predict it will be disastrous,
  • Only 5 – 6% foresee a positive impact.

This is the strongest opposition recorded to date

Industry Outlook: Stabilising Labour Supply Amid Intensifying Financial Pressure

The report shows a sector in transition: labour shortages have eased significantly, yet employers now face accelerating financial and regulatory pressures that are reshaping how they plan, recruit and invest.

Key Takeaways

  • Labour availability is at its strongest since 2021, but worker quality has fallen to a three-year low, creating new operational challenges
  • Rising labour costs – driven heavily by National Insurance increases – are reshaping business decisions, from wage setting and recruitment to automation strategies
  • Employers and labour providers are strongly aligned in calling for:
    • Reduced Employer National Insurance (67% of employers; 69% of labour providers)
    • Incentives for benefit claimants to enter work (58% of employers; 61% of labour providers)

One labour provider captured the mood succinctly:

“Employer NI threshold is killing us.”

In Summary: A Sector Becoming More Stable and More Strategic

Despite mounting cost pressures, the survey reveals a supply chain that is adapting with increasing sophistication. It is:

  • More stable, with the most dependable labour availability seen in years
  • More proactive, as employers strengthen planning, retention and workplace culture
  • Better connected, with referral-driven recruitment supporting resilient worker pipelines
  • More aligned, with shared priorities for attracting UK-based workers
  • Increasingly strategic, as automation and operational improvements take hold

These positive developments suggest that the foundations for recovery and future growth are strengthening, even as the sector prepares for heightened financial and policy challenges.

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