(Jan 12): UK employers cut back their hiring again in December, according to a closely watched survey that is likely to add to the Bank of England’s concerns about a weakening jobs market.
The Recruitment & Employment Confederation (REC) and KPMG said permanent staff placements fell at the steepest rate since August, as businesses grappled with rising costs and weak sentiment in the wake of Labour’s tax-raising budget on Nov 26. Hiring for temporary roles also fell, albeit at a milder rate.
Recruiters surveyed by REC and KPMG also reported a sharp increase in job seekers, largely driven by redundancies, while demand for staff weakened.
“After a long stretch of rising cost pressures and higher global economic uncertainty, many firms continue to pause hiring and are flexing where they can by using temporary staff,” Jon Holt, group chief executive and UK senior partner at KPMG, said. “As we head into the New Year, this restraint is likely to remain in the near term.”
The findings add to a growing sense that the jobs picture is deteriorating quickly, just as Bank of England (BOE) officials debate how far they can push ahead with further interest-rate cuts this year.
However, REC’s report also showed lingering price pressures in some corners of the market, where specific staff are in short supply. Starting salary inflation climbed to a seven-month high, as some employers struggle to attract candidates — albeit, the increase was below the long-term average.
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While businesses were largely spared by Chancellor of the Exchequer Rachel Reeves’ November budget, employers are still reeling from a sharp increase in employment costs at her first fiscal event in 2024.
They are worried that a number of government decisions seem to have been made “without thinking through the likely secondary consequences,” REC chief executive Neil Carberry said in a Bloomberg Radio interview.
“I think we are beginning to see a bit of a bifurcation between those firms who are finding ways to cope with the new cost profile that they have and those firms who are really struggling,” he added, warning that redundancies are set to remain elevated in the next months.
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Chief financial officers surveyed by the BOE said they expect to award slightly smaller pay rises over the next 12 months, according to a release last week. After cutting jobs last year, companies also reported they forecast employment to decline a further 0.4% in 2026, the weakest outlook since 2020.
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