The Recruitment and Employment Confederation (REC) and KPMG have revealed that demand for UK workers in the UK fell sharply in November, marking the lowest reading of their index since August 2020. The index dropped to 43.9 from October’s 46.1, reflecting challenging conditions for businesses navigating the current economic climate. Historically, such low readings have been recorded only during events of global significance, such as the COVID-19 pandemic and the aftermath of the September 11 attacks.
Permanent Placements Decline; Temporary Market Eases
Permanent UK worker placements saw the steepest decline since August 2023, while temporary worker placements experienced a slightly improved pace of contraction compared to October. REC Chief Executive Neil Carberry highlighted that employers used November to reassess their hiring strategies after facing financial pressures.
“It should be a surprise to no-one that firms took the time to re-assess their hiring needs in November after a tough budget for employers,” said Carberry. “The real question now is whether businesses will return to the market as they go into next year with greater certainty about the path ahead.”
Mixed Signals for Future Labour Market Stability
Jon Holt, group chief executive of KPMG UK, noted that future interest rate cuts and investment plans might offer hope for stabilising the labour market. “This should give businesses greater confidence which may help stabilise the labour market,” Holt said. However, businesses have expressed concerns that tax rises may create long-lasting challenges.
A separate survey from Incomes Data Research reported that the median private sector pay increase dipped to 3.9% in the three months to October, down from 4.0% previously. This reflects a tightening labour market as businesses adjust to rising operational costs.
Business Sentiment Remains Cautious
A recent Bank of England survey revealed that over half (54%) of businesses expect to reduce employment to manage increased costs. Furthermore, 38% anticipate implementing lower wages, raising questions about the trajectory of inflationary pressures and overall economic stability.
While optimism exists around future economic conditions, recent forecasts suggest a cautious road ahead. The Confederation of British Industry recently downgraded its growth projections for next year, citing increased financial burdens on employers. However, contrasting analyses, including those from the OECD, suggest potential growth driven by alternative budget measures
The Workers Union says…
“The latest data underscores the complexity of the UK’s labour market as businesses juggle the effects of economic uncertainty, tax rises, and shifting demand. As 2024 approaches, attention will focus on whether employers regain confidence to re-engage with hiring, buoyed by clearer economic signals.”
