OECD Employment Outlook 2026: United Kingdom
Table of contents
These country notes provide an overview of the labour market situation in each country based on data from OECD Employment Outlook 2026. This edition has a special focus on geographic disparities in jobs and incomes.
The OECD labour market remains resilient, with employment and labour force participation rates at record highs (72.1 and 76.7% in Q1 2026 on average across countries, respectively) and unemployment low by historical standards (4.9% in May 2026). However, there are increasing signs of weakening, including rising unemployment in many countries, slowing employment growth, and easing labour shortages. Due to the new surge in energy prices, real wages are expected to fall in many countries.
The UK labour market remains resilient by historical standards, but signs of weakening have become more visible. The unemployment rate stood at 5.0% in February 2026 in line with the OECD average of 4.9%, but 0.5 percentage points (p.p.) higher than a year earlier. Employment remains high, with the employment rate at 75.0% in Q1 2026, unchanged from a year earlier, while labour force participation has improved slightly from 77.9% in Q1 2024 to 79.1% in Q1 2026.
Labour shortages in the United Kingdom have eased markedly since their post-pandemic peak. The vacancies-to‑unemployed ratio rose sharply in 2021 and 2022, reflecting exceptionally tight labour-market conditions, but has since fallen back and was below its Q4 2019 level by Q4 2025. This suggests that recruitment difficulties have not only moderated from their post-pandemic highs, but are now less acute than before the pandemic, as there are fewer vacancies per unemployed person than in late 2019.
Real wage growth has slowed in the United Kingdom. In Q1 2026, real wages were around 0.8% higher than a year earlier, compared with an annual increase of almost 2% in Q3 2024. This moderation in real wage growth is in line with the wider OECD pattern of slowing real earnings growth. Despite this slowdown, UK real wages were around 3.6% higher than in Q1 2021. Projections from the latest OECD Economic Outlook show that renewed inflationary pressures are expected to squeeze real incomes, suggesting that recent real wage gains may remain fragile.
Regional disparities in labour market outcomes are large across the OECD. In over half of OECD countries, employment rates across small regions vary by more than 20 p.p. These disparities do not simply reflect differences in who lives where, but also in the economic opportunities that regions have to offer, and they translate directly into disparities in living standards.
In the United Kingdom, regional disparities in employment rates are somewhat greater than in most OECD economies: the gap between regions in the top and bottom quintiles of employment rates stands at 13.4 p.p., compared to an average of 11.4 p.p. The overall range is wider still, with employment rates varying from around 62% in Wolverhampton to around 86% in the Orkney Islands. This points to particularly weak employment outcomes in some local labour markets, even though the United Kingdom also has regions with very high employment rates.
Regional labour market disparities in the United Kingdom are more persistent than in most OECD countries. While low-employment regions have been catching up in most OECD countries since the early 2010s, there has been little such convergence in the United Kingdom. This suggests that regional labour market disparities in the United Kingdom are relatively entrenched, and that national labour market strength does not automatically translate into improved employment prospects across all parts of the country.
Non-compete clauses – contract terms that prevent workers from moving to a competitor or starting a competing business – and related contractual restrictions are widespread across OECD labour markets. They covered about 20 to 30% of workers in 2025, and are increasingly used beyond highly specialised jobs. While firms may use such clauses to protect trade secrets or investments, evidence suggests they can reduce job mobility, weaken wage growth, slow knowledge diffusion and undermine productivity growth.
Between 15% and 28% of private‑sector employees are currently bound by a non-compete agreement, compared with an OECD-country average of around 20% to 30%. Firms in the United Kingdom report an upward trend, suggesting that reliance on contractual restrictions may be growing in the British labour market.
These clauses are not confined to workers for whom the traditional rationale is strongest, such as those with access to sensitive business information or substantial firm-specific investment. In the United Kingdom, between 8% and 18% of workers with no access to confidential information nonetheless report having signed a non-compete, as do between 7% and 18% of low-paid workers. This raises questions about whether such clauses are always economically justified, since unnecessary restrictions on job switching can reduce labour mobility, weaken wage growth and slow productivity-enhancing reallocation across firms.
Restrictive labour-market practices also extend beyond non-competes. About 36% of surveyed UK firms report knowledge of no-poaching agreements, wage‑fixing arrangements, or both, occurring in their industry. While this is below the cross-country average of 48%, it still suggests that anti-competitive practices are widespread in the UK labour market.
Contact
Andrew AITKEN (✉ andrew.aitken@oecd.org)
Mark PEARSON (✉ mark.pearson@oecd.org)
This work is issued under the responsibility of the Secretary-General of the OECD, and does not necessarily reflect the official views of OECD Member countries.
This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Note by the Republic of Türkiye
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union
The Republic of Cyprus is recognised by all members of the United Nations with the exception of Türkiye. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
The full book is available in English: OECD (2026), OECD Employment Outlook 2026: Geographic Disparities in Jobs and Incomes, OECD Publishing, Paris, https://doi.org/10.1787/7e710f54-en.
© OECD 2026
Attribution 4.0 International (CC BY 4.0)
This work is made available under the Creative Commons Attribution 4.0 International licence. By using this work, you accept to be bound by the terms of this licence (https://creativecommons.org/licenses/by/4.0/).
Attribution – you must cite the work.
Translations – you must cite the original work, identify changes to the original and add the following text: In the event of any discrepancy between the original work and the translation, only the text of original work should be considered valid.
Adaptations – you must cite the original work and add the following text: This is an adaptation of an original work by the OECD. The opinions expressed and arguments employed in this adaptation should not be reported as representing the official views of the OECD or of its Member countries.
Third-party material – the licence does not apply to third-party material in the work. If using such material, you are responsible for obtaining permission from the third party and for any claims of infringement.
You must not use the OECD logo, visual identity or cover image without express permission or suggest the OECD endorses your use of the work.
Any dispute arising under this licence shall be settled by arbitration in accordance with the Permanent Court of Arbitration (PCA) Arbitration Rules 2012. The seat of arbitration shall be Paris (France). The number of arbitrators shall be one.