Britain’s job market showed signs of cooling in February, with hiring slowing and salary growth for new starters reaching its lowest level in four years, according to a survey released on Monday.
The findings highlight employer concerns over rising employment costs and a sluggish economy.
The Recruitment and Employment Confederation (REC) reported that wage growth for permanent hires dropped to its lowest rate since February 2021. Meanwhile, permanent job placements declined for the 29th consecutive month, though the rate of decline was slower than in January.
"While many businesses remain cautious about hiring, the softer decline may signal that expectations of future interest rate cuts and stronger-than-expected economic data are easing pressures on employers," said Jon Holt, chief executive of KPMG, which sponsors the survey.
The survey also revealed a sharp increase in job candidates, similar to trends seen in 2024, while the number of vacancies continued to shrink, marking its 16th consecutive monthly decline.
The Bank of England (BoE), which is set to maintain interest rates at 4.5% next week, is closely monitoring wage trends. The central bank expects private-sector wage growth to slow from over 6% in late 2024 to around 3.75% by the end of 2025.
A separate report by Incomes Data Research (IDR) showed that the median private-sector pay settlement remained at 4.0% in the three months leading up to January. Overall pay settlements, which the BoE considers less directly linked to inflation, dipped to 3.5% from 4%.
"The overall median pay rise may climb again by April due to the upcoming increase in the National Living Wage and a potential inflation uptick," said Zoe Woolacott, senior researcher at IDR.
The UK’s minimum wage is set to rise by 6.7% in April, while inflation reached a 10-month high of 3% in January. The BoE forecasts inflation could rise further to 3.7% later this year.
The IDR survey analyzed 68 pay awards covering 300,000 employees between November 2024 and January 2025. The REC/KPMG report was based on responses from approximately 400 companies surveyed between February 10 and February 24. Photo by Phil Whitehouse, Wikimedia commons.