Companies are slowing investment until they see more momentum in the economy, according to a closely-watched report on employment conditions which warns that budget measures are “acting as brakes” on hiring.
The Recruitment and Employment Confederation (REC) and KPMG’s latest snapshot on recruitment found permanent staff vacancies declined at the steepest rate since August 2020 last month.
“Consultants reported redundancies at clients, and that the higher cost of employing staff related to government policies had continued to weigh on hiring activity,” the study said.
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“Temp billings were especially hard hit, falling at the fastest rate since June 2020.”
Neil Carberry, REC’s chief executive, said firms were taking a “wait and see” approach to hiring until momentum in the
economy picked up.
“It takes time, and real action, to build business confidence,” he said.
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“An autumn of fiscal gloom, difficulty navigating significant upcoming tax rises… are all acting as brakes on progress.”
The government warned of a “tough” budget ahead shortly after winning the election last July, claiming the Conservatives had left behind a £22bn black hole in the public finances.
October’s budget placed business on the hook for £25bn of £40bn in tax hikes, with the lion’s share coming from adjustments to employer national insurance contributions from April.
Business groups responded by warning the bill would hit investment and hiring. The additional costs could also be passed on in the form of higher prices, they said.
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Official figures released last month showed a decline in the number of payrolled employees had help push the country’s jobless rate up to 4.4%.
The data was the first to cover the month of November which followed the budget.
Private sector surveys since have suggested a pick up in redundancies, with more recent S&P Global purchasing managers’ index readings showing the pace of job cuts at its highest level in four years.
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Sainsbury’s and BP are among major employers to have announced job losses since the budget.
The Treasury has consistently argued that the budget tax measures were a one-off to help fix the public finances and allow for long overdue investment in public services.
Its growth agenda, which includes not only infrastructure and green energy investment but also planning reforms to help get the country building, is expected by economists to only make a significantly positive contribution during the second half of the parliament.
Last week, the Bank of England slashed its forecast for UK growth this year from 1.5% to 0.75% as it expected the national insurance rise to weigh on activity, in particular by pulling down employment.
It said it was too early to gauge the potential threats from trade tariffs imposed, and threatened, by Donald Trump in the United States – but warned that such protectionism was generally negative for economic growth.
