Job vacancies in the UK are moving at a rapid pace during the pandemic as the business climate darkens
UK employers have significantly reduced their recruitment efforts in November, with job vacancies falling at the fastest pace since the pandemic began.
New data from KPMG and the Recruitment and Employment Association (REC) show that demand for workers has fallen at a “precipitous pace,” pointing to a deep recession in the labor market and dim prospects for an imminent economic recovery.
November marked the 13th consecutive month of expansion in vacancy numbers, which is particularly affected. “Businesses must balance the prospect of increased labor costs following the Budget, which has led to a rapid decline in employment across the board,” said Jon Holt, chief executive of KPMG.
Similar findings from accountancy firm BDO underscore the scale of the problem. Its monthly sentiment index registered the lowest level of business confidence since January last year. The gloom, which coincides with a period when companies typically enjoy a pre-Christmas sales surge, suggests the UK economy is likely to contract again in November.
New burdens on employers were introduced in October’s Budget by Chancellor Rachel Reeves, including higher business taxes, increases in National Insurance contributions for employers, and a higher minimum wage. While Labour, led by Prime Minister Keir Starmer, has held on to its commitment to expanding the economy and raising living standards, the tax hike appears to have dampened the appetite for investment and weakened the will to hire in all sectors of industry and services.
The BDO output index, a key measure of economic development, recorded its lowest reading since October last year. “December marks the end of a difficult few years for businesses and the decline in business confidence this month is not surprising given the major challenges they continue to face,” said a BDO spokesperson.
As employment declines and the labor force expands, the KPMG/REC report suggests that wage growth may begin to soften. Although wage pressures remained unchanged in November, they hovered near their weakest levels in nearly four years.
Retailers in particular, who face a combined £5 billion in additional tax costs and wage changes next year, have warned that further cuts to staff levels could be imminent. The British Retail Consortium estimates that next April’s top National Insurance contribution and a big increase in the minimum wage will pile up unprecedented pressure on a sector already facing wary shoppers.
Neil Carberry, REC’s chief executive, is hopeful that today’s turmoil may bring stability to the area. “The strength of short-term employment gives hope. Firms are likely to relax more in time while managing the current uncertainty,” he said.
Indeed, the near-term outlook could be brighter as the Bank of England indicates that interest rates will fall in 2025 and the government is increasing investment efforts. “The prospect of further tax cuts next year, as well as the government’s investment plans, both point to better growth in the near term,” added Holt. “This should give businesses greater confidence, which could help stabilize the labor market.”
