Demand for staff in the UK was the weakest for four years in November as Budget tax increases have spread gloom over the pre-Christmas jobs market, according to a survey of UK recruiters.
KPMG and the Recruitment and Employers Confederation, which published the monthly report on Monday, said a drop in its vacancies index, from 46.1 to 43.9, pointed to the sharpest contraction in job openings since August 2020. The survey also showed a steep drop in staff placements.
Jon Holt, group chief executive and UK senior partner at KPMG, said businesses were “having to weigh up the prospect of increasing employee costs” following the Budget’s rise in employer national insurance contributions, leading to “an accelerated slowdown in hiring activity across the board”.
The survey corroborates other business surveys, including the latest report by the Bank of England’s Decision Makers Panel, which last week showed that more than half of respondents expected to cut headcount in response to the national insurance increase.
Separate data from the hiring website Indeed suggests that seasonal hiring has been even weaker than the overall jobs market, even though more people than usual are looking for short-term work to top up their income.
Postings for seasonal roles in the first half of November were 39 per cent lower than last year and 46 per cent below the same period in 2019, Indeed’s data showed. Overall postings were 14 per cent below the pre-pandemic average.
Economists said low consumer confidence and rising labour costs had damped demand for seasonal workers, against a wider industry rethink of how temporary staff are used.
“Consumers are still feeling the pinch from cost of living pressures while retailers’ costs have increased amid strong wage growth in the sector,” said Jack Kennedy, senior economist at Indeed.
“While retailers weigh the impact of the Budget measures, they will be mindful of protecting their margins,” he added.
Meanwhile, Indeed said more jobseekers were searching for seasonal work than in the previous six years. Kennedy said this reflected the weaker job market and the continued effect of rising living costs.
Kate Shoesmith, deputy chief executive at the REC, said pre-Christmas hiring had been “muted” after a tough year for hospitality and retail.
She said employers in sectors where “the biggest cost is staffing” were often seeking to “maximise the number of people on variable shifts” so they could ask existing staff to work more hours rather than hiring temps.
Indeed’s analysis covered hundreds of thousands of job postings in 48 sectors including holiday-related terms such as “seasonal” and “Christmas”.
Retail hiring has been slowing down, with 57,000 vacancies on average between August and October, according to official data — a decline of 27 per cent, from 78,000 during the same period last year.
Vacancies in the accommodation and food service sector declined 17 per cent across the same three-month period — from 113,000 in 2023 to 94,000 this year. Overall vacancies fell 14 per cent over the same period.
Harvir Dhillon, economist at the British Retail Consortium, a trade body, said wholesale and retail labour demand had “cooled very significantly”, with weaker consumer demand “a big concern” for retailers.
“Food inflation is still positive, so food retailers are going to be in a more difficult bind [choosing between] raising prices versus margin absorption,” he said, adding that non-food retailers “are likely at the whim of economic conditions and how wage growth evolves”.
He added that planned increases to employers’ national insurance costs and the national living wage, announced in the Budget last month, would put “downward pressure on hiring intentions”.
Although the postings trends paint a gloomy picture across the sector, several of the UK’s largest supermarket chains are hiring a similar number of temporary staff across stores, warehouses and online fulfilment centres, compared with last year.
Tesco, for example, said in October that it would seek to hire 26,000 staff, compared with 30,000 in 2023; Sainsbury’s aims to employ 20,000, versus 22,000; and more upmarket chain Marks and Spencer is taking on 1,000 more employees than last year’s 10,000.
Kate Nicholls, chief executive of UKHospitality trade body, said bookings for the festive period were similar to previous years. But, she added, there had been a shift away from temporary contracts over the longer term in the sector.
“We’re seeing greater job security, more permanent contracts, but more flexible contracts, which means you don’t see as many adverts for just Christmas jobs as you used to,” she said.
Additional reporting by Laura Onita.