A KPMG and the Recruitment & Employment Confederation (REC) poll shows that UK job postings for permanent posts dropped at their fastest pace in four years last month, indicating mounting symptoms of strain in the labour market.
The data shows a notable slowing down in hiring as companies become reluctant to hire given difficult economic times. Following August 2020, when the nation struggled with the COVID-19 epidemic, UK job openings for permanent posts showed the sharpest fall. December also saw a drop in temporary employment prospects, underscoring a general labour market slowdown.
What Economic Difficulties Affecting Employment?
With December showing the 14th month of diminishing vacancies, the job market’s cooling trend was clear throughout 2024. With the most significant declines in demand for permanent employment, the poll found the executive/professional and IT and computing sectors as the most affected.
Companies in the retail and hotel sectors have expressed worries about the government’s intended £25 billion rise in National Insurance Contributions (NICs), scheduled for April. Many feel the regulation will slow down recruiting even more.
Group Chief Executive of KPMG, Jon Holt, said the UK employment market started sluggishly in 2025. “As we start the new year, the UK jobs market is showing a subdued performance,” Holt remarked. “Businesses pausing to take stock of higher employment costs, a more gradual pace of interest rate cuts, and rising inflation could cause the hiring market to exhibit further signs of caution in the short term.”
Exist Any Positive Sign among the Difficulties?
Though vacancy rates have dropped, there are signs of underlying labour market resiliency. The poll indicated that salary inflation has increased the fastest since August 2024, indicating the continuous need for qualified personnel.
“Businesses will need fresh talent as 2025 goes on and UK economic growth picks up,” Holt said. “Salary inflation showing its strongest in four months indicates they are still eager to compete for it.” As economic recovery picks up steam, UK employment opportunities could climb again.
How is government policy adding uncertainty?
Introduced as a major income-raising tool in the October budget, rising NICs are under intense observation by policymakers. Recent observations by the Bank of England indicate that government measures have introduced “additional uncertainties” to the economic picture, therefore confounding projections for inflation trends and hiring.
Concurrent with this sell-off in financial markets at the beginning of the year, the yield on 10-year government bonds dropped to 4.8%, the lowest level since the global financial crisis in 2008. This has generated fresh worries about public finances, adding another complication to the economic surroundings.
What would future economic projections mean for expenditure?
On March 26, the Office for Budget Responsibility (OBR) will publish a fresh economic projection. Government policy is expected to be shaped by this report. Should the OBR projection show that the Chancellor risks surpassing her budgetary guidelines, expenditure reductions could prove inevitable.
Future Prospect for the Labour Market in the UK
Although the immediate picture for the UK job market is still difficult, growing pay inflation indicates that companies are still vying for talent despite the general slowdown. The OBR’s March projection and the publication of the most recent inflation figures next week will shed light on the economy’s direction and how it will affect UK employment opportunities and hiring patterns.
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