Labour market: Vacancies ‘tumble’ in January ahead of Labour’s tax raid
Slack continues to build in the labour market, a closely watched survey suggests, with vacancies “tumbling” ahead of April’s national insurance hike.
Demand for staff fell at its greatest extent since August 2020, a new report from KPMG and the Recruitment and Employment Confederation (REC) said.
This sharp fall was particularly pronounced for permanent staff, with the rate of contraction accelerating for the fifth consecutive month.
The survey showed another drop in the number of people placed by recruitment firms in new roles, extending the period of contraction to 28 months.
Firms also continued cutting staff in January, contributing to a greater supply of people looking for both permanent and temporary jobs.
“There were again reports of a reluctance to hire staff given upcoming changes to the cost of employing staff,” the report said, adding that there was “a general air of business uncertainty”.
Employment costs are set to increase in April, when the government’s national insurance hike and minimum wage increase will come into force.
Firms have warned that they will have to cut jobs, slash wages and hike prices in response to the measures, all while dealing with the government’s new package of employment rights.
“An autumn of fiscal gloom, difficulty navigating significant upcoming tax rises and little progress on the practicalities of a costly new approach to employment rights are all acting as brakes on progress,” Neil Carberry, chief executive of the REC said.
The survey will add to evidence that the labour market is struggling under the burden of a series of measures introduced by the new government last year.
The most recent estimate from the Office for National Statistics (ONS) suggested that the number of payrolled employees fell by 47,000 in December, the steepest drop since November 2020.
In a note published last week, Simon French, head of research at Panmure Liberum, said the government’s measures had “all the hallmarks of a labour market policy mistake by lumping on too much synchronously.”
With the labour market continuing to loosen, the survey showed that pay growth softened in January and remained well below the historic trend.
“Although firms were again willing to pay higher starting salaries for good quality candidates, an increased availability of staff tended to weigh on pay growth,” the survey said.