Uncertainty around last week’s Autumn Budget has accelerated the long-running negative trend in recruitment activity as businesses increasingly put hiring plans on hold.
The latest Jobs Outlook data from the Recruitment and Employment Confederation (REC) and KPMG showed that permanent placements across the UK fell at their steepest rate since March and have now been in decline for over two years.
Budget uncertainty
Budget 2024: Employers’ national insurance up to 15%
Temporary job billings also suffered their fastest fall in seven months.
Each month, recruitment consultancies report on the number of people placed in permanent jobs, and billings received from placing people in temporary or contract positions.
Index readings above 50 signal a higher number than the previous month, while numbers below 50 signal a decline.
Nationwide, the permanent placements index recorded 44.1, while temp billings stood at 46.3. Panellists noted recruitment freezes at clients amid a lack of business confidence, with some firms attributing this to uncertainty created by the Labour government’s first Budget.
October saw the government table its Employment Rights Bill, which included proposals to introduce day-one rights for unfair dismissal and restrictions on the use of zero-hours contracts, while the Budget unveiled an increase to national insurance contributions for employers from 13.8% to 15% and a reduction in the minimum threshold from which employers start paying NI from £9,100 to £5,000.
Neil Carberry, REC chief executive, said: “These figures are a timely reminder that demand from employers for new staff has weakened since the election – though the overall picture remains resilient by comparison to pre-pandemic.
“There are a few positive signs in this month’s data – like more robust performance in London, which is often a bellwether. But things now stand in the balance – firms need to be persuaded to invest, with recent changes to NI thresholds, the minimum wage and prospective changes to employment law all causing concern.”
Carberry added: “Firms will be looking for the government to deliver a clear, stable growth plan and detailed regulatory changes that enable firms rather than put them off over the next few months.
“Temporary work in particular is a fantastic way of helping people take steps out of inactivity, and the threat of new employment laws undermining opportunities for workers must be addressed.”
Jon Holt, group chief executive at KPMG, said: “Uncertainty over the Autumn Budget saw businesses continue to put hiring plans on hold during October leading to the steepest contraction in permanent staff appointments since March. But employers didn’t turn to temporary staff to fill gaps, with these appointments also facing their biggest reduction in seven months.”
Permanent roles’ starting salaries increased again during October, but the rate of inflation maintained its recent downturn, falling for a fourth successive month to its lowest since February 2021. Where pay increased, this was linked to competition for high-quality candidates in key roles.
“While businesses are still willing to pay more for top talent, the growing pool of available candidates means salary inflation was at its weakest since early 2021,” said Holt. “The [Bank of England’s] Monetary Policy Committee will have considered this trend in their meeting on Thursday.
“With many of the tax rises announced in last week’s Budget impacting businesses, the expectation from some chief execs is that this could further dampen hiring as companies grapple with absorbing any extra costs. However, with the Office for Budget Responsibility forecasting a rise in productivity and a Budget that signalled more long-term policy making, businesses may feel that this all brings some degree of certainty.”
Employers including Sainsbury’s and BT have this week outlined the additional costs they face in light of the 6.7% increase to the national living wage and the impact of the increase in employers’ NI contributions.
BT said it was facing additional costs of around £100 million, while Simon Roberts, Sainsbury’s chief executive, said the NI increase would cost an extra £140 million next financial year. He said the supermarket would try to “mitigate the impact” but that retail’s tight margins meant “there just isn’t the level of capacity to absorb this level of unexpected cost inflation that is coming at us as fast as it is”.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Recruitment and resourcing opportunities on Personnel Today
Browse more recruitment and resourcing jobs
