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UK recruiters reported a further slowdown in hiring in December as companies sought to cut staffing costs in response to planned tax rises, new worker rights and a worsening economic climate.
A monthly survey by advisory firm KPMG and the Recruitment & Employment Confederation pointed to the sharpest decline since August 2023 in permanent staff placements, with an index reading dropping from 40.7 in November to 39.5 in December.
Recruiters also reported a drop in revenues from temp billings, with an index reading of 46.3, down from 47.7 in November. Any reading below 50 signals a decline in business.
REC chief executive Neil Carberry said the report reflected “a weak mood in some businesses as they built their budgets for this year and made changes designed to save on costs after a tough Budget”.
The KPMG/REC survey has been more gloomy than official measures of the UK’s labour market in recent months, which suggest that redundancies remain low and employment is flat, rather than falling.
But the data will heighten investors’ concerns about the growing threat of stagflation in the UK economy, which have driven a sharp rise in UK government borrowing costs since the start of 2025.
It adds to mounting evidence that business sentiment soured sharply as a result of the tax and spending measures announced in the October Budget, leading economic activity to stall at the end of last year.
A string of surveys suggest employers are seeking to freeze hiring or raise prices in order to lessen the impact of increases in national insurance contributions and the minimum wage from April, as well as the looming costs of compliance with new legislation strengthening workers’ rights.
Yet despite slower hiring, wage growth remains strong. Employers such as retailer Next have said they still need to lift pay for staff in mid-ranking roles in order to maintain the incentives to progress from entry-level positions, where the statutory minimum wage has risen steeply for several years.
The KPMG/REC survey paints a similar picture of slowing activity and pay pressures. It suggests the sharpest contraction in permanent staff vacancies has been for executive and professional roles.
But job openings declined across all sectors for the second consecutive month in December, even in areas suffering chronic labour shortages such as care.
Meanwhile employers remained willing to increase starting salaries in order to secure the best candidates, the survey showed, with the pace of pay growth picking up to a four-month high.
Jon Holt, group chief executive and UK senior partner at KPMG, said businesses were still ready to compete to secure new workers but had “paused to take stock of higher employment costs, a more gradual pace of interest rate cuts and rising inflation”.
