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UK job vacancies fall at fastest pace since pandemic as business mood darkens

December 9, 2024

What price happiness? The answer might be £3,360 a year, as the average UK worker would take a 10.5% pay cut to work for an employer where staff enjoy “above average” levels of happiness, a study has shown.

UK employers cut their recruitment efforts sharply in November, with job vacancies falling at their fastest rate since the onset of the pandemic.

Fresh data from KPMG and the Recruitment and Employment Confederation (REC) reveal that demand for staff declined “at a sharp and accelerated pace,” pointing to a deepening malaise in the labour market and denting hopes for a near-term economic uplift.

November marked the 13th consecutive month of easing vacancy numbers, with permanent roles particularly affected. “Businesses are having to weigh up the prospect of increasing employee costs following the Budget, which has led to an accelerated slowdown in hiring activity across the board,” said Jon Holt, group chief executive at KPMG.

Parallel findings from accountancy firm BDO underline the extent of the problem. Its monthly sentiment indicator registered the lowest level of business confidence since January last year. This gloom, coinciding with a period when companies typically enjoy a pre-Christmas boost in sales, suggests that the UK economy may have contracted again in November.

New burdens on employers were introduced in October’s Budget by Chancellor Rachel Reeves, including higher business taxes, an increase in employers’ National Insurance contributions, and a higher minimum wage. While Labour, led by Prime Minister Keir Starmer, has staked its credibility on expanding the economy and raising living standards, the tax hikes appear to have dampened investment appetites and weakened the appetite to hire across the industrial and service sectors.

BDO’s output index, a key measure of economic momentum, recorded its lowest reading since October last year. “December marks the end of a tough couple of years for businesses and the drop in business confidence this month is not a surprise given the significant challenges they continue to face,” said a BDO spokesperson.

As hiring slows and the pool of available candidates grows, the KPMG/REC report suggests that wage growth may begin to soften. Though pay pressures remained largely unchanged in November, they are hovering near their weakest levels in almost four years.

Retailers in particular, who face a combined £5 billion in extra costs from tax and wage changes next year, have warned that further cuts to staffing levels may be on the horizon. The British Retail Consortium estimates that next April’s higher National Insurance contribution and a substantial increase in the minimum wage will pile unprecedented pressure on a sector already grappling with cautious consumers.

Neil Carberry, chief executive of the REC, remains hopeful that today’s turbulence may give way to stability. “The resilience of temporary recruitment offers some hope. Firms are likely to rest more on temps while they manage the current uncertainty,” he said.

Indeed, the near-term outlook may brighten as the Bank of England signals further interest rate cuts through 2025 and the government ramps up investment initiatives. “The prospect of further rate cuts through next year, alongside the government’s investment plans, both point to improved growth in the near term,” Holt added. “This should give businesses greater confidence, which may help stabilise the labour market.”