Unemployment in the UK is on the rise, not only because of the rise of AI, but also because of rising employment costs. Many UK businesses now look to hire talent overseas to avoid these high costs. Let's find out how this is changing Britain's labour market.
Read the full article on The World Financial Review: “How Government Policy is Driving British Jobs Overseas”
The UK is currently still exiting a financial crisis. Simultaneously, UK unemployment has hit a five-year high of 5.2%, and youth unemployment has climbed to 16.1%. Many people may blame this on the use of AI, but most business owners say it’s due to rising hiring costs. In April 2025, employer National Insurance contributions increased from 13.8% to 15%, while the earnings threshold at which those contributions begin fell from £9,100 to £5,000. This increased payroll costs by a significant amount.
While having to deal with this, business owners also had to face the National Living Wage rising by 6.7% to £12.21 an hour. Further pressure is expected from the upcoming Employment Rights Bill, which will ban zero-hour contracts and introduce day-one employment protections. These new policies have good intentions and aim to improve the lives of employees, but many businesses are being squeezed to breaking point, and many simply can’t afford to keep hiring at home.
This creates an impossible equation. How do you protect existing jobs, absorb rising costs, comply with new regulations, and somehow stay competitive? For a growing number of UK businesses, the answer has been to look abroad.
The pandemic threw curveballs at UK businesses. They’ve had to face margins eroded by inflation, higher energy costs, and higher commercial rent costs. And now, UK businesses have to face higher payroll costs.
UK business owners would love to pay their employees more, but wanting to pay people more and being able to afford to are two very different things. When policymakers talk as if employers can absorb any additional burden indefinitely, they often miss what employment looks like in much of the real economy: tight margins, seasonal volatility, intense competition, and limited pricing power.
Remote work has shown us that location is no longer limiting. Finance, administration, marketing, customer service, and technology can now be delivered from almost anywhere. Speaking with The World Financial Review, The Legends Agency Group CEO, Alex Fenton, believes that South Africa has become a great place for UK businesses to look to. Alex says, “Salary costs typically run 40–60% lower than UK equivalents because the cost of living is fundamentally different. Cape Town’s workforce is highly educated, English-speaking, and increasingly experienced working within UK business culture. The time zone is within one to two hours of London, making real-time collaboration genuinely functional. No missed mornings. No 3am calls.”
Looking to hire overseas is not about abandoning your country or exploiting overseas talent: it’s about survival. Faced with existential financial pressure, most business owners have three options: cut domestic headcount sharply, close the doors, or find a model that keeps the whole thing moving. For a growing number of CEOs, offshoring represents option three.
Fenton says as an entrepreneur, it makes sense to look overseas, but as a Brit and a father, he finds it troubling. “Every role that moves offshore is a young person in the UK who doesn’t get their first job. Every graduate who can’t find work is a longer-term drag on the economy, on tax revenues, on the very public services the Government is trying to fund.”
The Government’s instinct to protect workers is the right one. But protection without affordability isn’t protection, it’s an illusion. Raise the cost of employment too steeply and you don’t get better-paid British workers: you get fewer of them. To reverse this, the UK government would need to reverse this and acknowledge the cumulative burden on employers. Policy needs to be redesigned to encourage job creation rather than inadvertently punishing it. Fention suggests, “NI relief for new hires, or reduced employer NI on the first roles created in a given year, allowing businesses to expand without immediately triggering a disproportionate tax shock. It also means investing seriously in AI upskilling so British workers can compete on capability, not just cost.”
Governments cannot legislate prosperity into existence. They can only create the conditions for it. If hiring in Britain remains structurally unaffordable, the jobs will not disappear; they will simply be created somewhere else.
