How geopolitical and economic instability is affecting workforces
With tariff shocks, stagnation and geopolitical fracture reshaping the economic map, organisations are restructuring faster than ever. The internal consequences are only just beginning.
Economics does not stay politely outside the office door. It walks straight in, takes a seat in the senior leadership meeting, and starts making decisions about headcount, investment, and the degree of honesty that leaders feel able to extend to the people who work for them.
We are living through one of the more turbulent macroeconomic periods in recent memory. The US tariff shocks of 2025-26 (the broadest and most aggressive deployment of trade barriers by a major economy in decades) have disrupted supply chains, compressed margins, and introduced a level of economic uncertainty that is already being internalised into workforce decisions across British and European firms.
The ILO’s 2025 World Employment and Social Outlook cut its global employment growth forecast by seven million jobs, attributing the reduction directly to trade disruption. Those seven million jobs are headcount decisions, hiring freezes, and restructuring programmes being made right now in organisations that are doing their best to appear calm. And all of this before that self-inflicted madness of the Iran war forago.
What happens inside organisations when the economic ground shifts beneath them is one of the least-examined questions in the management literature. The visible effects (redundancy programmes, wage freezes, restructuring announcements) receive coverage. The invisible ones do not.
The internal transmission mechanism
The pathway from macro-economic disruption to internal organisational life runs through several stages, most of which are less visible than they are consequential.
Hiring freeze. This sounds innocuous but it is not. Put most simply, hiring freezes redistribute work. The projects that were budgeted on the assumption of headcount that never arrived are rarely cancelled. They are absorbed by the people who are already there, who absorb the additional load without additional pay, under the explicit or implicit understanding that this is not the moment to complain. Workloads expand quietly and burnout follows. And the data on burnout (63% of UK employees showing at least one characteristic, per Deloitte 2024) is not independent of this dynamic. It is, in significant part, a product of it.
Skills hoarding. In periods of economic uncertainty, employees with in-demand capabilities become reluctant to develop others or share knowledge that might reduce their own indispensability. Team learning slows while the organisational knowledge base becomes more fragmented and less transferable. This is rational individual behaviour that produces collectively irrational organisational outcomes. This is a textbook prisoner’s dilemma played out at the level of human capital.
Broken psychological contract. This is the implicit understanding (never written down, rarely discussed, but deeply felt) about what employees owe their organisation and what it owes them in return. The research on psychological contract violation consistently shows that when organisations break their implicit commitments (around job security, career progression, fair treatment) the effects on engagement, discretionary effort, and trust are severe and long-lasting. They are also cumulative. Each round of restructuring leaves a residue of wariness that the next round compounds.
The psychological contract is never written down. But when it breaks — and in a turbulent macro environment, it breaks repeatedly — the effects on engagement and trust are severe, long-lasting, and cumulative.
The rational mistrust of organisations
There is a conversation that leadership teams need to have about why their employees don’t trust them. It requires more honesty than most are comfortable with.
The Ipsos Karian and Box IC Index 2025 (based on the largest survey of UK employee communication and culture) found that only 25% of UK employees fully trust their company leadership. This reflects the accumulated consequence of decades in which organisations have, when under economic pressure, treated their workforces as a cost variable first and a community of people second.
Employees have not become unreasonably suspicious. They have become accurately suspicious. They have watched organisations communicate ‘no redundancies planned’ and announce redundancies a few months later. They have watched ‘our people are our greatest asset’ in the annual report and ‘voluntary departures encouraged’ in the internal memo six weeks after a bad quarter. The evidence base for their mistrust is extensive and entirely rational.
This matters economically as well as culturally. DDI’s Global Leadership Forecast 2025 found that high-potential employees are 3.7 times more likely to leave within the year if their manager doesn’t actively invest in their development. In a tight talent market, the cost of losing your best people to a competitor who has maintained their development commitments is a competitive disadvantage that compounds with each departure.
What good looks like in a turbulent macro environment
The evidence is reasonably clear on what distinguishes organisations that manage through economic turbulence with their culture intact from those that emerge damaged and depleted.
The first differentiator is radical transparency about constraint. Organisations that tell their people what the actual financial situation is (not the managed version, the actual version) and then explain the genuine trade-offs being made, generate dramatically better outcomes than those that manage through ambiguity. Employees, it turns out, can handle bad news considerably better than they can handle being misled about it. The anger that follows a redundancy programme is rarely about the programme itself. It is about the gap between what people were told and what was true.
The second is clear internal mobility frameworks. In periods of external uncertainty, visible and accessible pathways to move within the organisation serve a retention function that goes well beyond their direct cost. They signal that the organisation sees its people as having a future, not just a current function.
The third is genuine psychological contract management: being explicit, as an organisation, about what it can and cannot commit to, rather than allowing implicit expectations to build to a level that cannot be met. This requires leaders to say uncomfortable things clearly and early. It is, predictably, the one organisations most consistently fail to do.
The invisible hand of macroeconomics will continue to reach into organisations for the foreseeable future. The question is whether leaders treat that as a private operational problem to be managed quietly; or as a human reality that their people are navigating and deserve to navigate with accurate information.
Sources
ILO World Employment and Social Outlook 2025. Global employment growth forecast cut by seven million jobs for 2025, directly attributed to trade disruption and tariff policy. ilo.org
Deloitte UK (2024). Mental Health and Employers. 63% of UK employees showing at least one burnout characteristic. deloitte.com/uk. Connection to workload expansion via hiring freezes and headcount redistribution is author’s analytical inference supported by burnout cause data (Mental Health UK Burnout Report: 54% cite high/increased workload).
Ipsos Karian and Box IC Index 2025 (in collaboration with IoIC). Survey of UK employees on internal communication, trust and culture. Only 25% of UK employees fully trust their company leadership. ipsoskarianandbox.com
Edelman Trust Barometer 2025. Employer trust fell three points — the sharpest single-year decline in the barometer’s 25-year history. 61% of global public holds a ‘crisis of grievance’ mindset toward institutions. edelman.com/trust/2025/trust-barometer
DDI. Global Leadership Forecast 2025. Survey of 10,796 leaders across 50+ countries. High-potential employees 3.7x more likely to leave within a year if manager does not regularly provide development opportunities. ddiworld.com/research/global-leadership-forecast-2025
Psychological contract research: Rousseau, D.M. (1989). ‘Psychological and Implied Contracts in Organizations’. Employee Responsibilities and Rights Journal, 2(2), 121–139. Violation of psychological contracts produces severe, long-lasting and cumulative effects on engagement, discretionary effort and trust.