Businesses are continuing to struggle with recruitment as new employment legislation begins to take effect, according to fresh data from the British Chambers of Commerce.
Nearly three quarters of firms (71 per cent) reported hiring difficulties in the first quarter of 2026, the latest Quarterly Recruitment Outlook shows, with just 29 per cent saying they had no problems recruiting staff.
The research, based on responses from more than 4,560 UK businesses – 91 per cent of which were SMEs – highlights persistent recruitment challenges across all sectors, particularly in transport and construction where 82 per cent and 81 per cent of firms respectively reported issues. Retail saw the lowest level of difficulty, though a majority (60 per cent) still struggled to recruit.
Labour costs remain the most significant pressure for businesses, cited by 73 per cent of respondents. The burden is particularly acute in hospitality (85 per cent), transport and logistics (84 per cent) and manufacturing (78 per cent).
The survey was conducted between 9 February and 9 March, before the full impact of escalating tensions in the Middle East was felt.
Declan Riddell, Policy Adviser at Staffordshire Chambers of Commerce, said the findings reflect a difficult start to the year for businesses.
He said: “The BCC’s Quarterly Recruitment Outlook only serves to highlight some of the real challenges facing business in what has been a turbulent start to 2026.
“Recruiting the right calibre of staff continues to be a problem faced by all sectors. Labour costs continue to be ranked as the biggest cost pressure for businesses. Ongoing uncertainty about the Middle East conflict only serves to heighten future concerns.”
Despite ongoing pressures, some firms are looking to grow. More than a quarter (27 per cent) expect to increase their workforce over the next 12 months, up from 23 per cent in the previous quarter. However, the majority (63 per cent) anticipate no change, while 10 per cent expect to reduce staff numbers.
Investment in training remains subdued, with 58 per cent of firms reporting no change in spending on workforce development. Only 23 per cent increased investment, while 19 per cent cut back.
Patrick Milnes, Head of Policy: People and Work at the BCC, added: “Firms of all shapes and sizes are continuing to face a challenging and costly labour market.
“Our latest data shows hiring difficulties persist, as firms across all sectors struggle to find the right people and skills they need. Even before the Iran War, this was having a huge impact on economic growth.
“At the same time, the Employment Rights Act is beginning to take effect, adding further burdens for firms that continue to be underestimated.
“Ministers need to work in partnership with business to tackle the ongoing skills crisis and improve productivity.
“Next month’s King’s Speech is an opportunity for the government to back SMEs by outlining plans to cut business costs, support employers and provide a compelling blueprint for economic growth.”
