Hiring Freeze: Employers Cut Back on Recruitment Amid Rising Labour Costs and Tax Uncertainty

Strategic Insights -

Gloomy business surveys have revealed a significant slowdown in recruitment activity, with hiring intentions stuck near a record post-pandemic low. The KPMG and Recruitment & Employment Confederation (Rec) survey found that permanent placements stood at 40 in July, marginally up from the previous month's two-year low of 39.1. The report also pointed to a further drop in vacancies, slower pay growth, and a glut of candidates.

Key Takeaways:

  • Recruitment activity remained close to a two-year low in July, with agencies reporting a sharp slowdown in placements of both permanent and temporary staff.
  • The KPMG and Rec survey's index for permanent placements stood at 40, a marginal increase from the previous month's two-year low of 39.1.
  • Kate Shoesmith, Rec deputy chief executive, stated that employers in low-wage sectors are "pausing due to cost pressures and uncertainty around employment law".
  • The Chartered Institute of Personnel and Development (CIPD) survey found that business confidence in hiring is stuck near a record post-pandemic low, with only a quarter of employers expecting staff levels to increase in the next three months.
  • A third survey by the audit firm BDO painted a similarly dismal picture of hiring intentions, citing tax and minimum wage increases as a major concern for businesses.
  • James Cockett, economist at the CIPD, stated that the survey reflects mounting cost pressures, global uncertainty, and the potential impact of new workers' rights, but suggests "flat rather than catastrophic" employment overall.
  • The CIPD survey suggests that there is "acute pressure" in certain areas, especially the public sector, education, and low-paid sectors such as care and retail.

Statistics:

  • The KPMG and Rec survey's index for permanent placements stood at 40 in July.
  • The CIPD survey found that only 25% of employers expect staff levels to increase in the next three months.
  • 16% of employers expect to cut their headcount.
  • The BDO survey cited tax and minimum wage increases as a major concern for businesses.
  • The CIPD survey suggests that there is "acute pressure" in the public sector, education, and low-paid sectors such as care and retail.

Sources:

  • KPMG and Recruitment & Employment Confederation (Rec) survey
  • Chartered Institute of Personnel and Development (CIPD) survey
  • Audit firm BDO survey
  • Office for National Statistics' labour force survey
  • CNBC (quoted speech of BoE governor Andrew Bailey)