The UK labour market saw a sharp downturn in December as employers struggled with the tax increases introduced in the government’s budget, according to a survey released on Thursday by
the Recruitment and Employment Confederation (REC) and KPMG. The survey highlighted a significant drop in job vacancies.
The monthly index tracking staff demand dropped to 42.8 in December, down from 43.9 in November, marking its lowest point since August 2020 during the height of the COVID-19 pandemic. Excluding the pandemic, this was the weakest performance since the global financial crisis of 2008-09.
Permanent job placements experienced a particularly steep decline, the most significant since August 2023. The data added to a series of negative economic indicators following finance minister Rachel Reeves' announcement in October of the most substantial tax increases since 1993.
“This report highlights a cautious sentiment among businesses as they planned their budgets for the year, implementing cost-saving measures in response to the challenging fiscal environment,” said Neil Carberry, chief executive of the REC.
Carberry stressed the importance of January's data, a period when labour market activity typically rebounds after a seasonal lull, to gauge the extent of the slowdown.
The British economy stagnated in the three months leading to September, and the Bank of England (BoE) estimates it remained flat in the fourth quarter.
Meanwhile, REC’s measure of starting salaries for permanent roles hit a four-month high in December, which may attract the attention of the BoE's Monetary Policy Committee as it evaluates inflationary pressures.
A separate business survey published earlier in the week revealed the fastest reduction in staffing levels in nearly four years, attributed to the rise in employer social insurance contributions from April.
Reeves defended the budget as a necessary step to stabilize public finances and foster long-term economic growth through increased investment. Photo by Phil Whitehouse, Wikimedia commons.