UK Labor Market Sees Sharp Decline in Job Demand After Tax Hikes
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Demand for workers in Britain plummeted in November following the new Labour government's first budget, according to a survey released on Monday, highlighting the effects of increased taxes on businesses.
The Recruitment and Employment Confederation (REC) and KPMG reported that their index of staff demand dropped to 43.9, the lowest since August 2020, down from 46.1 in October. Only the COVID-19 pandemic, the global financial crisis, and the aftermath of the September 11 attacks had worse results.
Permanent staff placements saw the fastest decline since August 2023, while temporary worker demand eased slightly. REC's Chief Executive, Neil Carberry, noted that firms were reassessing their hiring needs after a tough budget for employers, questioning whether businesses would return to the market in 2025 with more certainty.
The government’s Employment Rights Bill, which aims to reform the labour market and raise living standards, has also raised concerns from REC.
Finance Minister Rachel Reeves will hope that the survey represents a temporary dip rather than the beginning of a prolonged downturn. Employers have warned that tax increases will have a lasting impact, with the Confederation of British Industry downgrading its economic growth forecast for next year.
A Bank of England survey revealed that 54% of businesses plan to reduce employment due to higher costs from the budget, and 38% expect lower wages. Additionally, a separate survey showed that private sector pay deals fell slightly to 3.9% in the three months to October.
Despite these challenges, Reeves has emphasized that the budget aims to fix public finances and fund public services, with a promise of stable tax policies. KPMG’s Jon Holt pointed to potential interest rate cuts and the government’s investment plans as reasons for optimism, which could help stabilize the labour market.
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