The number of job vacancies in November fell at the fastest rate since the start of the pandemic, as business confidence slumped to its lowest level in almost two years, according to two new reports.
In a damaging blow to the government efforts to boost growth, the latest monthly report on the job market from accountancy firm KPMG and the Recruitment and Employment Confederation (REC) found demand for staff declined at a “sharp and accelerated pace” last month, with the steepest fall in vacancies since August 2020.
November marked the 13th successive month of a fall in staff demand, with an “especially severe” drop among vacancies for permanent workers, in the latest sign of a further deterioration in the UK labour market.
“Businesses are having to weigh up the prospect of increasing employee costs following the budget, which has led to an accelerated slowdown in hiring activity across the board,” said Jon Holt, group chief executive at KPMG.
Meanwhile, business confidence has fallen to its lowest level since January last year, as companies face increased costs and faltering consumer demand, according to accountancy company BDO.
Keir Starmer has made expanding the economy and improving living standards a central mission of the Labour government. But a rise in business taxes in the budget in October was met with dismay by many business leaders and appears to have depressed investment and recruitment across many industrial and service sectors.
BDO said its index measuring business output recorded its lowest reading since October last year, despite the “golden quarter” of trading in the Christmas period which is usually the most lucrative time for businesses.
The output index contracted in November – the first time this year – signalling that the UK economy shrank last month.
“December marks the end of a tough couple of years for businesses and the drop in business confidence this month is not a surprise given the significant challenges they continue to face.”
The KPMG/REC report said the slowdown in the jobs market, coupled with an increasing number of candidates, could put more downward pressure on wage inflation.
The report found that wage inflation in November remained largely unchanged from October’s 44-month low.
Last month, the Bank of England governor, Andrew Bailey, said retailers are right to warn of potential job cuts as a result of tax increases announced in chancellor Rachel Reeves’s first budget in October.
The British Retail Consortium estimates that retailers will face a £2.3bn bill from April, after the implementation of the rise in employer NICs from 13.8% to 15%, as well as the reduction in the earnings threshold when firms must start paying it, from £9,100 to £5,000.
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The NICs rise will come into force next April, alongside a significant increase in the national minimum wage, which retailers claim will cost them a further £2.7bn.
“The real question is whether businesses will return to the market as they go into next year with greater certainty about the path ahead,” said Neil Carberry, chief executive of the REC.
“The resilience of temporary recruitment offers some hope. Firms are likely to rest more on temps while they manage the current uncertainty.”
Last week, Bailey indicated that there could be four interest rate cuts next year, one more than the markets have factored in.
“The prospect of further rate cuts through 2025, alongside the government’s investment plans, both point to improved growth in the near term,” said Holt. “This should give businesses greater confidence which may help stabilise the labour market.”