UK employers reduced recruitment efforts sharply in November, with job vacancies falling at their fastest rate since the start of the pandemic.
New data from KPMG and the Recruitment and Employment Confederation (REC) reveals that demand for staff has fallen at a “sharp and accelerating pace”, indicating deepening labor market malaise and undermining hopes for a near-term economic recovery.
November was the 13th consecutive month to see a decline in vacancy numbers, with permanent roles particularly affected. John Holt, group chief executive at KPMG, said: “Companies must consider the possibility of increased staff costs post-Budget, which has resulted in an accelerating slowdown in hiring activity across the board.”
Parallel findings by accounting firm BDO confirm the scale of the problem. The monthly sentiment index recorded the lowest level of business confidence since January of last year. This gloom, which coincides with a period when businesses typically enjoy a boost in sales before Christmas, suggests the UK economy may contract again in November.
New burdens on employers were introduced in the October Budget by Chancellor Rachel Reeves, including higher business taxes, increased National Insurance contributions for employers, and an increase in the minimum wage. While the Labor Party, led by Prime Minister Keir Starmer, has staked its credibility on expanding the economy and raising living standards, tax increases appear to have dampened investment appetite and weakened the desire to hire across industry and services sectors.
The BDO production index, a key measure of economic momentum, recorded its lowest reading since October last year. A BDO spokesperson said: “December marks the end of a difficult couple of years for businesses and the decline in business confidence this month is not surprising given the significant challenges they continue to face.”
As hiring slows and the pool of available candidates grows, the KPMG/REC report suggests that wage growth may begin to decline. Although wage pressures remained largely unchanged in November, they are hovering near their weakest levels in nearly four years.
Retailers in particular, who face a combined £5bn in additional costs from tax and pay changes next year, have warned that further cuts in staffing levels could be on the horizon. The British Retail Consortium estimates that a rise in the National Insurance contribution next April and a significant increase in the minimum wage would add unprecedented pressure on a sector already grappling with wary consumers.
Neil Carberry, chief executive of the REC, remains optimistic that the current turmoil may give way to stability. “The flexibility of temporary staffing offers some hope. Businesses will likely rely more on temporary employees as they manage the current uncertainty.
In fact, the near-term outlook may brighten with the Bank of England signaling further interest rate cuts until 2025 and the government stepping up its investment initiatives. Holt added: “The prospect of further interest rate cuts over the next year, coupled with the government’s investment plans, indicates improved growth in the near term.” “This would give companies greater confidence, which could help stabilize the labor market.”