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Businesses brace for more layoffs as redundancy warnings climb to post-Pandemic high

Professional Services Editor, City AM

Last year emerged as the most severe year for redundancy warnings since the height of the Covid pandemic, and early 2026 is already accelerating that trend.

According to new data from the Liquidation Centre, sourced via an FOI, 2025 was the most severe year for redundancy warnings since 2020, with 315,605 jobs flagged for potential redundancy and redundancy payouts totalling over £477m.

The FOI revealed that over two million redundancy warnings were issued between 2020 and 2025, with last year the most severe, following a 45 per cent increase in warnings since 2021.

The UK’s labour market is increasingly strained as businesses struggle with rising operational costs, declining demand and ongoing economic uncertainty.

However, the data also suggested that despite record numbers last year, 2026 is already shaping up to be a bad year for layoffs. In the first two months of 2026, 736 employers have already filed for proposed redundancies, putting 56,396 jobs at risk of redundancy, nine per cent higher than during the same period in 2025.

Richard Hunt, director at Liquidation Centre, said: “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,” he added.

From rising operating costs and wage inflation to higher employer National Insurance contributions and the extra costs of employee rights, businesses are facing an unprecedented time.

Workers’ rights law to cause more layoffs

The Employment Rights Act, which saw its first set of provisions come into force in April, is having a knock-on effect on businesses on the brink.  Recent data suggested   that 65 per cent of British businesses are experiencing higher costs as a result of the new laws.

Lawyers told City AM  in February   that they expect to see businesses carry out a “clean up” of redundancies by the end of the year, ahead of other rights coming into force in January, which are expected to involve laying off staff at an even higher cost.

Stefan Martin, partner at Hogan Lovells, explained: “The change to the unfair dismissal qualification period next year, removing the cap, will affect employers.” Adding, “I think [businesses] will make the plan ahead of year-end to ensure that if they are doing some sort of cleaning up before January 2027″.

 
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