Companies are scaling back on hiring new staff due to a subdued economic outlook and increasing wage costs, according to recent business surveys. The consultancy KPMG and the Recruitment and Employment Confederation (REC) have reported a sharp decline in the number of people being placed in permanent and temporary roles for February, although hiring has slowed down less sharply than in January. This decline is seen as a sign of a weakening UK labour market.

A separate survey has shown an increase in unemployment as businesses prepare for a rise in labour costs in April. This has led to a drop in the employment index from the business advisory and accountancy firm BDO to levels not seen since the global financial crisis, indicating a drop in business optimism for the fifth time in a row.

The monthly jobs report from KPMG and the REC has highlighted firms’ reduced demand for workers, with overall vacancies falling further in February. There has also been an increase in job losses, which has limited overall pay growth. Starting salaries have risen at their weakest pace in four years.

Planned changes by Chancellor Rachel Reeves, including a £25 billion increase in employers’ national insurance contributions and a 6.7% rise in the minimum wage, are set to take effect from April. These changes are expected to increase labour costs for businesses.

Neil Carberry, the REC’s chief executive, noted some signs of improvement in the labour market as the economy moves into spring, led by the private sector despite recent tax increases. He called for Reeves to build confidence in the UK’s economic growth when she presents her spring statement to parliament on 26 March.

Jon Holt, the group chief executive and UK senior partner at KPMG, observed that many companies are adopting a “wait and see” approach to hiring, with a softer decline in recruitment in February possibly indicating that businesses are responding to expectations of further interest rate cuts and better than expected recent economic data.

BDO reported that the last time businesses showed a similar lack of confidence was in January 2021, during the Covid lockdowns. There was a second consecutive drop in UK business output in February, which BDO sees as a signal of a wider economic slowdown in the UK for the rest of the year, despite the resilience of the services sector.

Source: https://www.theguardian.com/business/2025/mar/10/firms-hold-back-on-hiring-amid-significant-cost-rises-surveys-say