Britain’s labor market continued to show signs of slowing down in October, according to a recent survey indicating the weakest wage growth since early 2021. Additionally, tax hikes announced
in last week’s budget could further affect hiring practices.
The survey conducted by the Recruitment and Employment Confederation (REC) and KPMG revealed that the index for starting pay for permanent roles dropped to 52.5 in October from 52.8 in September, marking its lowest level since February 2021, a period marked by the coronavirus pandemic.
The REC’s index for permanent job placements also fell, declining to 44.1 in October from 44.9 in September. This represented the steepest rate of contraction since March, as companies hesitated to hire amid uncertainties leading up to the new Labour government’s budget announcement.
“Today’s report on pay data offers little indication that the Bank of England should halt further interest rate cuts, which could help boost business confidence,” said Neil Carberry, REC’s chief executive.
The Bank of England, which has been closely monitoring wage growth to assess remaining inflationary pressures, lowered borrowing costs last Thursday by a quarter-point to 4.75% from 5%. The central bank noted that additional cuts were likely but would be implemented gradually.
The survey also showed a decline in job vacancies for the 12th consecutive month, signaling a drop in demand for workers. Meanwhile, the number of available job candidates rose for the 20th month in a row, with the survey highlighting the sharpest increase in temporary staff availability in nearly four years.
Jon Holt, group chief executive at KPMG, pointed out that the budget measures introduced by finance minister Rachel Reeves could exacerbate the slowdown in hiring.
On October 30, Reeves announced 40 billion pounds ($51.94 billion) in tax increases, which included higher social security contributions for businesses and a raise in the minimum wage for most adults. These changes are expected to place additional financial pressure on companies, potentially impacting hiring and wage growth.
“Many business leaders anticipate that the tax rises from last week’s budget could further dampen recruitment as firms contend with the challenge of absorbing these added costs,” Holt said. Photo by Phil Whitehouse, Wikimedia commons.