As we step into the new year, Stephen Isherwood, ISE’s joint CEO, considers whether we’re poised at the bottom of the up escalator or top of the down escalator.
Much as I would like to start the new year giving out positive vibes about the student employment market, the evidence suggests that 2026 is going to be another tough year all round. We may be pushing our way along a horizontal travelator.
We are not in a recession, but…
On a slightly positive front, the CBI expects UK GDP to grow by 1.3% in 2026, a smidge less than their 1.4% prediction for 2025. But the evidence from employers shows they are under financial pressure and have seen employment costs rise.
Not all employers are cutting back on hiring – the ISE recruitment survey showed that 30% of employers have increased student hiring. But the same survey reports an overall projected drop of 7% in student vacancies in 2026.
That the jobs market isn’t as bad as during the financial crash is cold comfort to students making record numbers of applications.
And it’s not just the student end of the labour market that is struggling. The latest REC/KPMG report shows a continued decline in employer demand across the jobs market coupled with a considerable increase in the supply of candidates for new roles – more job seekers hunting fewer jobs.
Unless the economy picks up significantly through the year a broad focus on the whole education and early career sector is only going to amplify.
This means that we are going to need answers on what are the right pathways through education and into work and what systemic change we want to see.
Will AI make us all redundant?
When we sift through the noise and uncertainty surrounding AI adoption in work and education, two separate impacts on our sector become clear: on jobs and the recruitment process.
On jobs, the evidence is mixed. Employers tell us that internal discussions focus on where AI can be introduced and its impact on role design. But no-one has told me that AI is the reason behind reduced hiring, the economy is to blame.
I even asked Chat GPT for an answer and got a waffly response about reduced demand for some roles but more opportunities in tech (our data shows the tech sector is reducing grad hiring).
If you aren’t in the HR tech business then you may not have come across a case working its way through the US courts that could have a significant impact on how AI is adopted within HR. A class action brought against Workday claims their AI sifting technology is discriminatory. If successful this could stop the growth of AI in recruitment.
Whether AI is adopted or not, the use of technology both by students and employers is likely to remain under the microscope.
Applications are at record levels, both for the students who make them and the employers who receive them. Employers won’t stop using technology to test candidates so more and more students will turn to tech solutions to help them gain advantage in their search for a job.
This is a genuine ‘wicked problem’ that no employer, university or solutions provider can solve alone. This might be one area where agentic AI could help students funnel their job search towards areas that they are most suited to.
Get into the detail on apprenticeships
This article isn’t the place to dissect the policy detail on the apprenticeship and skills reforms likely to be implemented through the coming year (Anne-Marie’s piece on the skills white paper is good place to start). But although change is certainly underway, as yet we are unclear on much of the detail and potential upsides and downsides.
The government is keen to reduce the number of NEETS, devolve some decision powers to the regions, and refocus the apprentice levy on priority sectors. Some larger employers are likely to feel that they have less say in the system and less control of their levy pots.
However apprenticeships impact your organisation, this is the moment to get involved.
How can ISE respond to these pressures?
Because of ISE’s unique membership range, we are ideally placed to gather the views of key stakeholders, formulate constructive policy positions and advocate for positive change.
Not only are we concerned with the mechanics of how employers fill their talent needs, we all have an ethical obligation to ensure that our sector meets the needs of society, including the students themselves.
There is a risk that if our sector doesn’t improve the selection process for students or work to boost levels of work experience and engagement in education pathways, employers will be held accountable for labour market failures that don’t deliver to the UK’s social and economic needs.
We can start this work by galvanising ISE’s infrastructure and stakeholder relationships to review our practices, work through the implications of future technologies, and enable our sector to respond the challenges that 2026 brings.