New analysis from insolvency specialists at Liquidation Centre suggests the UK labour market is entering a prolonged period of strain, with redundancy warnings continuing to rise and early indicators pointing to further job losses in 2026.
Data obtained via a Freedom of Information request to the Insolvency Service shows that 2025 recorded the highest level of redundancy warnings since the pandemic, with 315,605 roles identified as at risk and total projected redundancy payouts reaching £477.7m.
The findings reflect mounting pressure on employers as higher operating costs, weak demand and policy changes weigh on business confidence, trends that are increasingly visible across global labour markets.
REDUNDANCIES LIKELY TO CONTINUE INTO 2026
The trend appears to be persisting into 2026. In the first two months of the year, 736 employers filed HR1 notices, placing 56,396 jobs at risk of redundancy – a 9% increase compared with the same period in 2025. Given that HR1 filings typically precede job losses by weeks or months, this suggests redundancies are likely to continue rising throughout the year.
February’s figures are particularly notable. The 430 HR1 notices filed are almost identical to the 433 recorded in February 2009, shortly before unemployment peaked during the global financial crisis. While the current economic backdrop differs, the comparison highlights the scale of restructuring now under way across the UK economy.
REDUNDANCY INCREASES NOTED WORLDWIDE
The UK is not alone in facing mounting redundancy pressures. Recent international data points to a wider trend of workforce reductions and restructuring:
A recent survey found that 31% of companies planned layoffs during the 2025 holiday season, highlighting how cost-cutting is increasingly being prioritised over timing or employee impact. Another study found that three in 10 companies plan to replace employees with AI by 2026, underlining the structural nature of workforce change.
Labour market stress is also becoming more unevenly distributed:
- US “functional unemployment” has reportedly reached 24.7%, with disproportionate impacts on certain groups.
- In the UK, one in five young people are now unemployed for over a year, according to recent analysis.
Together, these trends suggest the UK’s redundancy surge is part of a wider structural shift in global employment, rather than an isolated national issue. The analysis indicates that the current rise in redundancies differs markedly from the pandemic period. Rather than a single external shock, businesses are contending with a combination of persistent pressures:
- Elevated operating and energy costs
- Wage growth and higher employer National Insurance contributions
- Weak consumer demand linked to the cost of living crisis
- Supply chain disruption and geopolitical instability
- Technological change, particularly automation and AI
These overlapping forces are contributing to what appears to be a more sustained labour market adjustment.
“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,” said Richard Hunt, Director at Liquidation Centre.
2026 is already shaping up to be “an unfortunate record year for redundancies”, added Hunt. “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.”
INCREASE IN REDUNDANCIES SINCE 2021
Over a longer time horizon, the data highlights the scale of change:
- More than 2 million redundancy warnings were issued between 2020 and 2025
- A 45% increase in redundancy warnings since 2021
- 2025 marked the highest annual total in five years
Unemployment has also risen to 5.2%, its highest level in nearly five years. And forecasts suggests further increases in 2026.
Based on current trends, Liquidation Centre estimates redundancies could reach 327,227 in 2026, representing a 3.7% increase on 2025 levels. While this is a slower rate of growth than the previous year, it still points to continued deterioration rather than stabilisation in the jobs market.
GUIDE FOR EMPLOYERS: HOW TO RESPOND TO RISING REDUNDANCY RISK
As economic pressures intensify, experts say businesses should take proactive steps to avoid reaching the point of large-scale layoffs. Here are a few pointers on how to deal with redundancy risk.
1. Monitor early warning indicators
Track key financial signals closely, including:
- Declining margins
- Rising cost of sales
- Slower customer payments
- Increased reliance on credit
Early intervention is often the difference between restructuring and insolvency.
2. Stress-test your business model
Assess how resilient your business is to:
- Further cost increases
- Demand shocks
- Interest rate changes
Scenario planning can help identify risks before they escalate.
3. Explore alternatives to redundancies
Before reducing headcount, consider:
- Hiring freezes
- Reduced hours or flexible working
- Redeployment or reskilling
- Operational efficiencies
These measures can preserve talent while reducing costs.
4. Seek professional advice early
Engaging restructuring or insolvency specialists at an early stage can open up more options, including:
- Company restructuring
- Negotiations with creditors
- Formal insolvency procedures where necessary
Delaying action often limits available solutions.
5. Communicate transparently with staff
Clear, early communication can:
- Maintain trust
- Reduce uncertainty
- Support workforce morale during periods of change
Poor communication can exacerbate disruption and reputational risk.
GUIDANCE FOR EMPLOYEES AT RISK OF REDUNDANCY
The rise in redundancy warnings, combined with longer-term unemployment trends – particularly among younger workers – suggests that many employees are facing a more competitive and uncertain job market.
While the outlook remains challenging, early preparation, awareness of rights, and proactive career planning can help individuals navigate what may be a prolonged period of labour market adjustment. Here are some practical steps that can help protect both finances and future prospects.
1. Understand your rights
If you are at risk of redundancy, you are entitled to certain protections under UK law, including:
- A formal consultation process (for larger redundancy programmes)
- Statutory redundancy pay (if eligible)
- Notice periods or pay in lieu
- The right to appeal the decision
Employers must follow a fair process and failure to do so could result in grounds for a claim.
2. Use consultation periods strategically
Consultation is not just procedural — it can be an opportunity to:
- Explore alternative roles within the company
- Propose flexible working or reduced hours
- Clarify redundancy selection criteria
Employees who engage early may be able to influence outcomes or identify internal opportunities.
3. Prepare financially as early as possible
If redundancy is a possibility, it is worth reviewing your financial position:
- Build or protect an emergency fund where possible
- Check eligibility for redundancy pay and benefits
- Review major expenses and short-term commitments
Planning ahead can reduce the immediate impact if job loss occurs.
4. Start your job search early
Given current labour market conditions, securing a new role may take longer than expected.
- Update your CV and online profiles
- Begin networking before leaving your role
- Explore adjacent industries or transferable skills
Early preparation can significantly shorten the transition period.
5. Consider reskilling or upskilling
With automation and AI reshaping the workforce, developing new skills can improve employability.
- Focus on digital, technical or in-demand sectors
- Look for short courses, certifications or employer-funded training
- Consider government or local retraining schemes
This can be particularly important in industries undergoing structural change.
6. Look after your wellbeing
Redundancy can have a significant emotional impact.
- Seek support from friends, family or professional services
- Maintain routine and structure where possible
- Use employer support services if available
Managing stress and maintaining perspective can be as important as financial planning.
PREPARING AHEAD
With redundancy warnings rising and 2026 expected to remain challenging, being prepared – whether as an employer or employee – can make a significant difference to outcomes.
For businesses, early and fair processes can reduce legal risk and protect reputation. For workers, understanding rights and acting early can improve financial stability and speed up re-employment.
Click here for more information about the Liquidation Centre’s report.
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