Hiring falls to 16-month low after Reeves’ ‘tough Budget’, survey shows
Firms are increasingly reluctant to make permanent hires, new research suggests, as the labour market continues to feel the squeeze of policy changes announced in October’s Budget.
The number of candidates placed in permanent roles by recruiters slipped to its lowest level in 16 months in December, according to KMPG and the Recruitment and Employment Confederation (REC).
Temporary billings also declined last month at a faster pace than seen through much of 2024.
Survey respondents noted a “lack of market demand” for new staff given concerns about the increase in the cost burden facing many employers this year.
“This report emphasises a weak mood in some businesses as they built their budgets for this year, and made changes designed to save on costs after a tough Budget,” Neil Carberry, chief executive of the REC said.
Firms will have to deal both with an increase to employers’ national insurance and a higher minimum wage from April due to the measures announced in Rachel Reeves’ maiden Budget.
Numerous reports have suggested that firms will cut jobs and slow hiring in response to the Chancellor’s policies.
The survey showed that the number of vacancies declined again in December, accelerating from November when vacancies had contracted at the fastest pace in over four years.
Jon Holt, chief executive at KPMG UK, said hiring activity was likely to show “signs of caution” in the short term due to concerns about the looming increase in the cost burden.
However, Holt remained more optimistic about the outlook for the labour market in the medium term, noting that starting salary inflation hit its fastest pace in four months.
“As 2025 progresses and UK economic growth picks up, businesses will need new talent. Salary inflation being at its steepest in four months shows they are still willing to compete for it,” he said.
Carberry was also hopeful that confidence would return to the labour market in the new year.
“Sentiment can change quickly,” he said. “December is always a hiring low point, and a new year brings new hope – with inflation under control, low unemployment and economic growth expected, the fundamentals are better than many appreciate.”