Uncertainty over UK government’s plans puts brakes on hiring

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UK businesses have put hiring on hold because of uncertainty over the government’s plans on tax, industrial strategy and workers’ rights, a closely watched survey showed on Monday.

Recruiters placed fewer people in jobs in September, in a continuation of a market slowdown that has lasted two years, the monthly report from KPMG and the Recruitment & Employment Confederation showed. Meanwhile growth in starting salaries was at its weakest since February 2021.

Jon Holt, UK senior partner at KPMG, said businesses had put the brakes on recruitment in the run-up to the Budget to “wait for clarity on future taxation, business and economic policy”.

Recruitment agencies responding to the survey said they had placed fewer people in permanent positions that month because “unclear government policy” had made their clients cautious.

An index measuring permanent placements rose from 44.6 in August to 44.9 in September, but remained well below the reading of 50 that would signal stable activity. Meanwhile a decline in temporary billings gathered pace.

The figures are the latest sign that confidence in the UK economy has been rattled by ministers’ warnings that tough decisions on tax, benefits and spending would be needed in the Budget to balance the books.

A separate survey published last month showed the prospect of a painful Budget had also hit households’ morale, with consumer confidence dropping sharply in September, even though the Bank of England’s August interest rate cut was starting to feed through to mortgage rates.

Since then, chancellor Rachel Reeves has been seeking to convey a more upbeat message, telling the Financial Times last week that the Budget would be about investment, and not about fresh public sector austerity.

“The government needs to continue to give chief executives confidence in the UK’s macroeconomic conditions and the country’s route to stronger growth,” said Holt.

Recruiters polled by KPMG and the REC have been reporting falling demand for staff for more than a year. In September, the drop in demand for permanent roles was sharpest in retail, construction and in the technology sector. The only significant growth in demand was for medical, nursing and care workers.

Because of the drop in demand, businesses that struggled to fill vacancies a year ago are now finding there are far more candidates looking for work, the survey indicated — some recently made redundant.

The KPMG/REC survey is closely watched by policymakers at present, because ongoing problems with the Office for National Statistics’ labour force survey mean there is no reliable gauge of unemployment.  

REC chief executive Neil Carberry said any further move by the BoE to cut interest rates would boost business, but that “eyes are also on the government” to set a clear industrial strategy and give employers more certainty over its plans for sweeping reforms to employment law.