20th October 2026
Britain's jobs market is showing signs of strain, with new figures revealing that the number of employees on company payrolls has fallen over the past year, despite a small monthly improvement in September.
The latest figures from the Office for National Statistics (ONS) suggest that employers remain cautious, while the retail and wholesale sector continues to face considerable pressure.
The ONS report, published on 20 October 2026 using HM Revenue and Customs' Pay As You Earn (PAYE) data, estimates that 30.3 million people were on UK payrolls in September. That represents a fall of 66,000, or 0.2%, compared with September last year. However, the number increased by 13,000 compared with August, offering a modest indication that the decline may be easing. The September figure remains provisional and could be revised as more information becomes available.
The figures present a mixed picture. The monthly increase is welcome, but the longer-term trend remains concerning. The number of employees on payrolls has declined from its peak in 2024, and annual growth has weakened over recent years. A labour market does not need to be in recession for households to feel the effects of fewer employment opportunities, particularly when the cost of living remains high.
Retail bears the brunt
One of the most striking findings concerns wholesale and retail, where the number of payrolled employees fell by 71,000 between September 2025 and September 2026. This was the largest decline among the industry sectors highlighted in the report.
Retailers face a difficult combination of pressures. Households are watching their spending, operating costs remain substantial, and businesses must decide whether they can afford to recruit or retain staff. Online competition, changing shopping habits and the cost of maintaining physical premises add to the challenges facing traditional high streets.
The figures do not establish that any single factor caused the employment decline. Nevertheless, the loss of jobs in such a large sector matters because retail provides work for people across the country, including younger workers and those seeking part-time employment.
For towns such as Wick and Thurso, the national figures are relevant. Local shops, hospitality businesses and service providers depend on households having money to spend. If employment weakens, families may cut back on non-essential purchases, creating further difficulties for businesses already struggling with costs.
There is a potential cycle here. Cautious consumers spend less, businesses become more reluctant to recruit, and fewer employment opportunities can make households even more careful with their money. The national statistics cannot tell us precisely how this is playing out in Caithness, but they underline why local employment trends deserve attention.
Where are jobs being created?
Not every sector is losing workers. Administrative and support services recorded the largest increase, with 66,000 more payrolled employees than a year earlier. The sector's employment total grew by 2.8% over that period.
This suggests that opportunities remain available in parts of the economy, although the figures alone do not tell us whether these jobs offer the same pay, security or prospects as those being lost elsewhere.
The contrast between sectors is important. A national employment total can appear relatively stable while particular industries, communities and groups of workers experience substantial changes. The challenge for policymakers is not simply to increase the overall number of jobs, but to help people move into sustainable employment where opportunities are expanding.
Pay is rising, but what does it mean for households?
There is better news on earnings. The ONS estimates that median monthly pay reached £2,660 in September, an increase of 4.4% compared with the same month last year.
Median pay represents the middle point in the distribution: half of employees earn more and half earn less. It is often a more useful measure of typical earnings than a simple average, which can be influenced by very high salaries.
However, rising pay does not automatically mean that every household is better off. These figures relate to gross monthly pay before deductions, and they do not measure how much disposable income remains after tax, housing costs, energy bills, food and transport.
The report also reveals substantial differences between industries. Median monthly pay ranged from £1,444 in accommodation and food services to £4,332 in finance and insurance. The fastest annual growth in median pay was recorded in other service activities, at 5.6%, while transport and storage recorded the slowest growth, at 1.8%.
For households, the important question is whether earnings are rising faster than the prices they actually pay. Someone receiving a pay increase may still feel worse off if essential costs rise more quickly or if they face reduced working hours.
Older workers and younger generations
Another notable finding is the increase in employment among older people. Between September 2025 and September 2026, the number of payrolled employees aged 65 and over increased by 71,000. The number aged between 18 and 24 rose by 56,000.
The increase among older workers may reflect a range of factors, including people choosing to remain in employment for longer or returning to work to supplement retirement income. The statistics do not establish the reasons behind the change.
For younger people, additional employment opportunities are welcome, but the wider jobs picture remains important. A weakening recruitment market can make it harder for school leavers, college graduates and young people seeking their first permanent position to gain a foothold in the labour market.
In rural areas, where the range of employers may be limited, the availability of suitable work can influence whether younger residents remain in their communities or move elsewhere.
A warning for the wider economy?
The latest figures should not be interpreted as proof that Britain is heading into a recession. The small increase in payroll employment during September offers some encouragement, and the figures may change as more data arrive.
However, the annual decline and the substantial fall in retail employment provide reasons for caution. A healthy economy needs businesses willing to invest, recruit and expand, supported by consumers who have sufficient confidence and disposable income to spend.
The Government faces a difficult balancing act. Employers need an environment in which taking on staff is financially viable, while workers need fair pay, secure employment and opportunities to develop their skills. Training and investment in growing industries may help, but the immediate pressures facing retail and other struggling sectors cannot be ignored.
For Scotland, and particularly for communities such as Caithness, the national figures are a reminder that headline employment totals can conceal local vulnerabilities. The next step is to examine regional and local-authority data to establish where payroll employment is falling and which industries are most affected.
Britain's jobs market is not collapsing, but neither should a modest monthly improvement distract from the longer-term picture. The real test will be whether employment stabilises, businesses regain the confidence to recruit and rising pay translates into a meaningful improvement in household living standards.
For now, the ONS figures offer a mixed message: more people are finding work in some parts of the economy, but the loss of thousands of payroll jobs, particularly in retail, shows that the recovery remains uneven.
Source
The main source is the ONS and HMRC's October 2026 PAYE earnings and employment bulletin. The figures cover employees paid through PAYE, not the self-employed, and the latest monthly estimates are provisional.
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/earningsandemploymentfrompayasyouearnrealtimeinformationuk/october2026