London to be hit hardest as jobs market struggles through 2026
The jobs market is set to worsen throughout the year, with UK employment forecast to suffer a net loss of 163,000 jobs.
That’s according to research from the ITEM Club, which has found that London is set to bear the largest absolute decline, shedding an estimated 25,000 positions as its retail and hospitality sectors slow.
Permanent job numbers fell at their sharpest rate in three months in April as uncertainty from the conflict in Iran weighed on hiring decisions, according to new data.
The permanent placements index set by KPMG and the Recruitment and Employment Confederation fell to 47.5 in April from 49.2 in March, its steepest decline since January.
As the sub-50 index figure showed there was a contraction in the jobs market, research suggested that businesses deferred recruitment in the face of rising cost pressures and geopolitical uncertainty.
Temporary billings offered a rare bright spot, edging above the neutral threshold to 50.4 — the first expansion in three months and the strongest reading in two and a half years — as employers opted for flexible staffing arrangements over permanent headcount commitments.
Jon Holt, group chief executive and UK senior partner at KPMG, said the small signs of recovery seen earlier in the year had been disrupted by the Iran conflict.
“Hiring decisions are being deferred, with the rise in temporary recruitment pointing to chief execs taking a more flexible approach to workforce planning,” Holt said.
Neil Carberry, chief executive of the REC, warned businesses were particularly concerned about the impact on inflation, borrowing costs and supply chain disruption. He called on the government to drop plans for guaranteed hours rules.
More job seekers due to redundancies
London and northern England bucked the national trend with a marked upturn in permanent placements, posting an index reading of 54.9.
The decline in vacancies was also more pronounced for the private sector than for the public sector.
Staff availability continued to climb, with the total availability index at 61.0, driven by redundancies and weaker demand, pointing to a loosening labour market that is keeping wage growth in check.
Wage growth pressures also appeared to intensify as researchers said that starting salary inflation increased at a faster pace.
The data compounds a broader deterioration in the UK jobs outlook. Official ONS figures show total vacancies fell to 711,000 in the first quarter — the lowest level in nearly five years — down 29,000 or 3.9 per cent in the quarter.