Demand for new staff among businesses slumped to levels seen in 2020 in the wake of last month’s budget, according to a survey of major recruitment consultants.
A monthly report by the Recruitment and Employment Confederation (REC) trade body and accountants KPMG suggested that the tax raid on firms announced by chancellor Rachel Reeves on 30 October forced employers to “re-assess their hiring needs”.
Its index covering hiring intentions came in at its lowest level since August 2020.
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The findings chime with warnings from business groups and trade bodies in the wake of the budget that the measures would hurt investment, pay and employment.
The hike to higher employer National Insurance contributions and the National Living Wage could also be passed on to consumers in the form of higher prices, they warned.
The government argues the tax take is necessary to help put the public finances on a more stable footing.
Ms Reeves will hope that the survey’s findings represent a one-off dip rather than the start of a longer downturn in the labour market.
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CBI chief’s approach to budget tax shock
She has prioritised help for working people as part of a growth-focused agenda covering Labour’s return to government, describing the measures as an essential one-off to rebuilding core public services.
REC chief executive Neil Carberry said of the report: “It should be a surprise to no one that firms took the time to re-assess their hiring needs in November after a tough budget for employers.
“The real question now is whether businesses will return to the market as they go into next year with greater certainty about the path ahead.”
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Chancellor confident despite low growth
The economy has slowed during the second half of the year though official figures covering October, released later this week, are tipped to show a return to tepid growth.
Bank of England governor Andrew Bailey has said that the reaction of business to the budget is the “biggest issue” facing Bank policymakers.
The uncertainty is clouding forecasts for growth in 2025.
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A survey by the Bank last week showed 54% of businesses would respond to the higher budget costs by reducing employment, while 38% expected lower wages.
Reeves has described the budget as a one-off to fix the public finances and pay for improved public services and has promised businesses stable and predictable tax policy to help them plan and invest.
However Jon Holt, group chief executive of KPMG UK, said expected interest rate cuts in 2025 and the government’s investment plans offered reasons for optimism.
“This should give businesses greater confidence which may help stabilise the labour market,” he said.