The UK labour market saw a softer decline in recruitment activity in February 2025, according to the latest report on jobs from KPMG and the Recruitment and Employment Confederation.
While the hiring of permanent staff continued to fall for the 29th consecutive month, the pace of the decline slowed compared with the start of the year. This marked the softest drop in permanent placements since last October, as companies adjusted to a weaker economic outlook and rising payroll costs, said the REC study.
However, the overall demand for staff remains subdued, with the number of people placed in permanent roles decreasing again in February, extending the current contraction to nearly two and a half years.
The demand for temporary staff also weakened, though at a slower rate than in January. Temporary billings posted their second-sharpest decline since June 2020, despite easing from January’s record 55-month low. The downturn in both permanent and temporary recruitment activity was a sign of continuing caution among businesses amid uncertain economic conditions, the analysis claimed.
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One of the key findings from February was a further slowdown in starting salary inflation, which reached its lowest point in four years. The rate of increase in starting salaries weakened for the second consecutive month, with reports indicating that pay rates were levelling off. This trend was linked to a combination of weaker demand for staff, an increase in the availability of candidates, and tighter budgets across businesses.
Staff availability saw a notable increase during the month, as the number of candidates for both permanent and temporary roles rose at a faster pace. This uptick was largely attributed to redundancies and fewer job opportunities, driven by a slower economic environment. The increased availability of workers aligns with the trends seen throughout 2024 as businesses continue to scale back their hiring efforts.
Regional data revealed that all four English regions saw a decline in permanent staff appointments, with the north of England experiencing the steepest drop. In terms of temporary staffing, London recorded the sharpest decline in billings, while the Midlands saw the softest reduction.
The public sector experienced the most significant falls in vacancies, particularly for temporary roles, which saw the sharpest contraction since June 2020. Private sector demand also weakened but at more moderate rates, with both permanent and temporary roles experiencing declines.
The REC’s panellists frequently mentioned that redundancies and a lack of job opportunities had increased the pool of available workers, the study found.
The availability of short-term/contract workers also increased at a quicker pace midway through the first quarter. Company lay-offs and fewer short-term roles had pushed up the supply of temp workers, according to recruiters.
Jon Holt, group chief executive and UK senior partner KPMG, said the softer decline “could be an indication that expectations of further interest rate cuts and better than expected recent economic data are starting to release some of the pressures on business”.
Businesses which are well capitalised would be “looking for signals to support future planning and growth, and with that will come confidence to invest and create jobs.”
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REC chief executive Neil Carberry added that the forthcoming national insurance rise for employers and measures in the Employment Rights Bill could act as a brake on growth, but there were “some hints of a turn in the labour market as we head into spring. This is led by the private sector – despite recent tax rises – and that shouldn’t be missed.”
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