The UK labour market is undergoing a structural shift that’s reshaping how workers seek opportunities and income in small businesses, Employment Hero data reveals. 

New data from Employment Hero’s Jobs Report, drawn from 4,438 businesses and 112,576 employees in the UK SME labour market shows a widening split: workers are  positioned to gain from seeking employment outside of the capital. Those looking for more jobs may be pulled toward the East or South, while those chasing stronger wage growth will increasingly find it in the North. London – historically the centre of both – is beginning to slow down on each measure, although it’s worth noting that on average, the capital still has higher wages and employees than all of the regions.

It’s a divide that signals a labour market that no longer moves uniformly. Instead, employees have been presented with more opportunities to pursue job opportunities in one region or higher pay in another.

Job Growth Concentrates in the East

While employment across the UK continues to recover after the post-Budget 2024 drop, rising 1.7% month-on-month and 4.0% compared to three months prior, a pronounced regional imbalance persists. The East leads the nation with a substantial 12.1% annual rise in employment – the strongest performance of any region – followed closely by the South at 9.1%.

The figures buck the trend that began in early 2025 as small businesses adjusted to a number of new considerations, including higher labour costs, changes to National Insurance contributions and the increases to the National Living Wage and National Minimum Wage introduced in April 2025. 

Full-time work has strengthened sharply, now showing 6.9% growth year-on-year, while part-time and casual work – once the fastest-growing category – sits at 3.6%.

Elsewhere, hiring momentum is far weaker. The Midlands posts a modest 2.6% annual gain. But the North remains in decline at -3.8% year-on-year, with only slight movement over the past quarter. London sits effectively flat at -0.2% annually despite a strong monthly lift.

For workers prioritising job availability – more openings, better odds of placement, stronger employment security – the East has become the new centre of gravity.

Wage Growth Strengthens in the North

As well as employment, wages are also buoyant in the East, with annual wage growth coming in at a strong 9.7%. The North has seen a 3.6% annual rise in wages, outpacing London, the South and the Midlands year on year. In a period where national wage growth continues to lag inflation at 2.3%, leaving many workers with lower real-term earnings, that matters a great deal. 

While those figures are encouraging, the region has marginally suffered in the short term with a monthly dip of -0.6%. Though it isn’t concerning now, such dips could become more meaningful if similar trends appear in the months ahead.

As has been the case for some time, London and the South remain subdued, with wage growth of just 1.2% and 1.3% respectively. For workers seeking higher income, the East and the North now offer the clearest advantage.

Across the country, wages rose 0.8% month-on-month and 6.6% over the quarter, but the regional divergence shows how uneven this recovery truly is. The forces driving job creation aren’t the same as those driving pay increases – and established trends are becoming less predictable.

London’s Slowdown Sharpens the Split

London’s performance underscores the broader rebalancing we’re seeing. Its flat employment growth and minimal wage gains place it between the poles of East and South-driven job expansion and North-driven pay growth, reinforcing the fact that the country’s key dynamics are beginning to migrate outward.

For employers, that means more competition for talent in regions they may previously have overlooked. For workers, it signals that staying in London – where the cost of living is higher  – no longer guarantees access to either plentiful jobs or better pay.

A Labour Market Defined by Trade-Offs

The data makes it clear: the UK labour market has stopped playing by one set of rules. For SMEs, that comes with consequences. In the South and the East, some employers may find themselves fighting harder for staff, while in the North, pressure to pay more to keep them could mount. In the short term, that means considering which side of the split affects businesses most – the hunt for talent or the squeeze on wages.