Hiring by UK businesses plunged at the fastest pace in nearly two years, according to a survey that suggested tha
t the fallout from a hike in payroll taxes is showing little sign of letting up.
Permanent staff appointments fell by the most in 22 months in J
ne and the number of available workers jumped, a monthly report by KP
MG and the Recruitment and Employment Confederation showed.
The survey of recruitment firms and employers pointed to the labor market continuing to cool after Chancellor o
f the Exchequer Rachel Reeves pushed through a £26 billion ($35.1 billion
) increase in employers’ national insurance and a hike in the minimum wage.
Official tax data suggest that employment has fallen sharply since the changes came into effect in April. It shows th
at the number of employees on payrolls has plunged by over a quarter
of a million since Labour’s first budget in October.
“Much of that hesitation stems from the scar tissue left by the Spring tax hikes and fear of further business ta
x rises,” said Neil Carberry, REC chief executive. “There is more volatility mo
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nth by month in the jobs market right now, as employers assess a complex picture and hire when they need to.”
The report said the supply of candidates rose at the quickest ra
e since 2020 and growth in permanent salaries eased to a four-month low. Va
cancies continued to fall with the retail sector suffering the biggest decline in permanent job postings.
Waning demand for workers is likely to feed into the Bank of England’s thinking as it considers whether to stick
to its once-a-quarter pace to rate cuts. Traders put the odds of another qu
arter-point reduction at the Monetary Policy Committee’s meeting next month at over 80%.
The rate-setters have been concerned about elevated wage growth and services inflation, fueled by wha
t had been a historically tight labor market. Both measures are now on the de
cline as demand for staff is curbed by higher employment costs and a tepid economy.