British employers sharply scaled back their recruitment efforts in November, with vacancies falling at the fastest pace since the start of the pandemic.
New data from KPMG and the Recruitment and Employment Confederation (REC) shows that demand for staff has fallen ‘at a sharp and accelerated pace’, pointing to a deepening malaise in the labor market and hopes of an economic recovery in the near future term decreases.
November was the thirteenth month in a row in which the number of vacancies fell, with permanent positions mainly affected. “Businesses are having to weigh the prospect of rising staff costs as a result of the budget, which has led to an accelerated slowdown in hiring activity across the board,” said Jon Holt, group CEO at KPMG.
Parallel findings from accounting firm BDO underline the scale of the problem. The monthly sentiment indicator recorded the lowest level of business confidence since January last year. This gloom, which coincides with a period when businesses typically experience a surge in sales before Christmas, suggests the UK economy may have shrunk again in November.
Chancellor Rachel Reeves introduced new charges on employers in the October budget, including higher business taxes, an increase in employers’ national insurance contributions and a higher minimum wage. While Labour, under Prime Minister Keir Starmer, has staked its credibility on expanding the economy and raising living standards, tax rises appear to have dampened investment appetite and weakened the appetite for workers in the industrial and service sectors.
BDO’s manufacturing index, a key measure of economic momentum, recorded its lowest reading since October last year. “December marks the end of a difficult few years for businesses and the decline in business confidence this month is no surprise given the significant challenges they continue to face,” a BDO spokesperson said.
With hiring slowing and the pool of available candidates growing, the KPMG/REC report suggests that wage growth could begin to weaken. Although wage pressures remained largely unchanged in November, they are hovering around the weakest level in almost four years.
Retailers in particular, who face a total of £5 billion in additional costs next year due to tax and pay changes, have warned that further workforce cuts could be on the horizon. The British Retail Consortium estimates that higher National Insurance contributions in April and a substantial increase in the minimum wage will put unprecedented pressure on a sector already struggling with cautious consumers.
Neil Carberry, CEO of the REC, remains hopeful that today’s turbulence will give way to stability. “The resilience of temporary recruitment offers some hope. Companies will likely rely more on temporary workers as they manage the current uncertainty,” he said.
The short-term outlook could even improve as the Bank of England signals further interest rate cuts until 2025 and the government steps up investment initiatives. “The prospect of further rate cuts into next year, alongside the government’s investment plans, both point to improved growth in the near term,” Holt added. “This should give companies more confidence, which could help stabilize the labor market.”