May 2026 Labour Supply Chain Survey

The latest ALP Labour Supply Chain Survey suggests that labour availability across the UK labour supply chain continues to improve, but rising employment costs, reduced margins and growing compliance burdens are now emerging as the dominant concerns for both labour providers and labour users.

The survey, conducted between 14 April and 15 May 2026, received responses from 116 labour providers and 91 labour users across sectors including agriculture, food manufacturing, warehousing, logistics and general manufacturing.

Labour supply continues to improve

The survey indicates that labour availability is continuing to improve, particularly in lower-skilled and temporary roles. Among labour providers, 40% reported meeting all client demand during the previous six months, while a further 41% reported being unable to meet no more than 10% of demand. Looking ahead, 51% expect to meet all client demand during Summer 2026.

Labour users reported that shortages in lower-skilled and unskilled roles are reducing, particularly for temporary, seasonal and agency positions. However, shortages remain significant in higher-skilled occupations. 24% of employers reported chronic shortages in highly skilled roles, while shortages in skilled and semi-skilled occupations have increased significantly compared with previous surveys.

Despite rising unemployment nationally, the results suggest that many employers continue to experience a mismatch between available workers and available jobs, particularly where specialist skills, experience or location-specific labour needs are involved.

Employment costs overtake labour shortages

For labour providers, labour shortages are no longer the primary business concern. Instead, rising employment costs have emerged as the most significant challenge, selected by 30% of respondents. Reduced margins (21%), lack of client volume (19%), unethical competitors (12%) and compliance requirements (10%) were also identified as major concerns, while only 6% cited labour shortages as their biggest challenge.

The wider business environment remains challenging. Three quarters of labour providers reported increased recruitment costs, 59% reported reduced margins and 54% reported an increased compliance burden. More than a third reported supplying fewer workers than six months ago.

Labour users reported similar pressures. Cost of labour was identified as the most significant challenge by 42% of employers, followed by skills shortages (30%) and labour shortages (15%). 87% reported increased labour costs during the previous six months, while 29% reported increased automation as businesses seek to manage rising employment costs.
Respondents frequently referenced the combined impact of National Minimum Wage increases, Employer National Insurance changes and wider employment reforms on profitability, investment and demand.

Skills shortages persist

While labour availability has improved overall, shortages remain evident across many skilled occupations.

The survey found that 31% of employers continue to experience intermittent or chronic shortages in lower-skilled and unskilled roles. However, shortages are considerably more acute in higher-skilled occupations, with 56% reporting shortages in highly skilled roles and 60% reporting shortages in semi-skilled positions requiring training and experience.

Looking ahead, employers are generally more optimistic about labour availability over the next six months, although concerns remain around recruiting skilled trades, managers and specialist workers.

Limited confidence in employment support programmes

The survey highlights continuing concerns about the effectiveness of government employment support initiatives.

Only 3% of labour providers rated their local Jobcentre as helpful, while 28% described their experience as unhelpful and 24% reported mixed experiences. Nearly half had not engaged with their local Jobcentre during the previous year.

Similarly, only 3% reported finding government return-to-work or employment support schemes helpful, while half were either unaware of the schemes or had not explored them.

Many respondents expressed frustration that employment programmes were failing to connect businesses with suitable candidates or effectively support people into work.

Businesses call for lower employment costs

Labour providers and labour users demonstrated strong alignment on the actions they believe government should prioritise.

Among labour providers, 82% supported reducing employer costs such as National Insurance contributions, 65% called for stronger incentives to work, and 45% supported extending visa routes for lower-skilled roles. Nearly a third also supported allowing labour providers direct access to visa routes.

Employers expressed similar priorities. Three-quarters supported reducing employer costs, 58% supported extending visa routes for lower-skilled roles, while 48% favoured stronger incentives to work and attracting more UK workers into employment.

These findings suggest that businesses increasingly view labour market participation and employment costs as greater constraints than the overall availability of workers.

Fair Work Agency concerns focus on cost and clarity

The forthcoming Fair Work Agency remains an area of concern for many respondents.

Among labour providers, the most common concern was that enforcement activity may focus disproportionately on compliant businesses rather than targeting serious labour market abuse and illegality. Other concerns included increased costs, inconsistent standards between regulated and unregulated sectors, and uncertainty about compliance requirements.

Employers’ concerns centred on a lack of clarity regarding the agency’s scope and approach, increased administration and greater exposure to risks outside their direct control.

The results suggest that businesses broadly support effective enforcement but are seeking greater clarity on expectations, responsibilities and implementation.

Supply chain transparency remains important

The survey also highlights potential gaps in labour supply chain visibility.

21% per cent of labour providers reported using umbrella companies to some degree, while 56% reported supplying workers through neutral vendor arrangements at least occasionally.
By contrast, 67% of labour users reported that umbrella companies were not permitted within their labour supply chains, while many reported limited knowledge of neutral vendor arrangements.

These differences may indicate that some labour users do not have full visibility of the labour supply structures operating beneath primary supplier relationships, reinforcing the importance of supply chain due diligence.

Artificial Intelligence gains momentum

The survey provides an early indication of how artificial intelligence is beginning to influence recruitment and workforce management.

44% of labour providers are currently exploring or planning the use of AI, while many are already using it for job advert writing, administration, client communication, candidate screening and compliance activities.

At the same time, AI use by applicants is becoming increasingly common. Two-thirds of labour providers reported seeing applicants use AI at least occasionally, most commonly for CVs and job applications, complaints and queries, and translation or language support.

Outlook

The May 2026 survey suggests that the labour market has entered a new phase. Labour availability continues to improve and lower-skilled shortages are easing, but businesses are increasingly focused on managing rising employment costs, maintaining profitability and navigating a more complex regulatory environment.

For labour providers, the challenge is no longer primarily finding workers. Instead, concerns have shifted towards margins, client demand, employment costs and compliance burdens. For employers, labour shortages remain important, particularly in skilled occupations, but cost pressures are now the dominant issue.

The findings suggest that maintaining business viability, competitiveness and investment capacity in an increasingly costly operating environment may become the defining challenge for the labour supply chain during the remainder of 2026.