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Demand for workers in Britain collapsed last month after the new Labour government’s first budget, a survey published on Monday showed, adding to other signs of the impact of the tax increases on employers.
The Recruitment and Employment Confederation trade body and accountants KPMG said their index of demand for staff slid to 43.9, the lowest reading since August 2020, from October’s 46.1.
Only the COVID-19 pandemic, the global financial crisis, and the immediate aftermath of the Sept. 11, 2001, attacks on the United States resulted in worse readings.
Permanent staff placements fell in November at the fastest rate since August 2023, although the pace of decline for temporary workers eased slightly from October, REC said.
“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,” REC Chief Executive Neil Carberry said.
“The real question now is whether businesses will return to the market.”
Last week REC issued an “urgent warning” over the government’s separate Employment Rights Bill which aims to reform the labour market and raise living standards, describing it as “undercooked.”
Finance minister Rachel Reeves, who announced her budget on Oct. 30, will hope that Monday’s survey represents a one-off dip rather than the start of a longer downturn in the labour market.
“The (Bank of England) will view the REC survey as confirming a slowdown in the labour market in November but we think rate-setters are unlikely to take the very weak headline (REC) balances at face value,” Elliott Jordan-Doak, senior economist at consultancy Pantheon Macroeconomics, said.
The REC survey is a diffusion index which can be prone to sharp but short moves around big political and financial events.
Employers have said the tax rises on businesses will have a lasting impact, nonetheless.
Last week, the Confederation of British Industry cut its estimate for economic growth next year due to the higher social security contributions, although other forecasters such as the OECD have said other measures in the budget will raise growth.
A BoE survey showed 54% of businesses said they would respond to their higher costs from the budget by reducing employment, while 38% expected lower wages.
Consultancy Incomes Data Research said on Monday the median pay deal offered by private sector employers slipped to 3.9% in the three months to October from 4.0% previously.
The BoE is watching for signs of diminishing inflation pressure in the labour market.
Reeves has described the budget as a one-off to fix the public finances.
Jon Holt, group chief executive of KPMG UK, said expected interest rate cuts in 2025 and the government’s investment plans offered reasons for optimism.
(Reporting by Andy Bruce; Editing by William Schomberg, Alexander Smith and Hugh Lawson)
