Budget tax hikes and financial gloom ‘acting as brakes’ on employment
Major recruitment consultants suggest vacancies for full-time roles are plunging
and demand for temporary workers is also falling at a pace not seen for four
years.
Business and economics reporter @SkyNewsBiz [http://twitter.com/@SkyNewsBiz]
Monday 10 February 2025 07:04, UK
Companies are slowing investment until they see more momentum in the economy,
according to a closely-watched report on employment conditions which warns that
budget measures are “acting as brakes” on hiring.
The Recruitment and Employment Confederation (REC) and KPMG’s latest snapshot on
recruitment found that permanent staff vacancies declined at the steepest rate
since August 2020 last month.
“Consultants reported redundancies at clients, and that the higher cost of
employing staff related to government policies had continued to weigh on hiring
activity”, the study said.
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“Temp billings were especially hard hit, falling at the fastest rate since June
2020.”
Neil Carberry, REC’s chief executive, said firms were taking a “wait and see”
approach to hiring until momentum in the
economy picked up.
“It takes time, and real action, to build business confidence,” he said.
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“An autumn of fiscal gloom, difficulty navigating significant upcoming tax
rises… are all acting as brakes on progress.”
The government warned of a “tough” budget
[https://news.sky.com/topic/budget-2024-11074] ahead shortly after winning the
election last July, claiming the Conservatives had left behind a £22bn black
hole in the public finances.
October’s budget placed business on the hook for £25bn of £40bn in tax hikes,
with the lion’s share coming from adjustments to employer national insurance
contributions from April.
Business groups responded by warning the bill would hit investment and hiring.
The additional costs could also be passed on in the form of higher prices, they
said.
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Official figures released last month showed a decline in the number of payrolled
employees had help push the country’s jobless rate
[https://news.sky.com/story/wage-growth-and-jobless-rate-rising-13293375] up to
4.4%.
The data was the first to cover the month of November which followed the budget.
Private sector surveys since have suggested a pick up in redundancies, with more
recent S&P Global purchasing managers’ index readings showing the pace of job
cuts at its highest level in four years
[https://news.sky.com/story/business-confidence-at-two-year-low-as-tax-hikes-loom-13284385].
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Sainsbury’s
[https://news.sky.com/story/sainsburys-to-cut-over-3-000-jobs-as-budget-tax-hikes-loom-13294853#:~:text=Sainsbury’s%20to%20cut%20over%203%2C000,close%20%7C%20Money%20News%20%7C%20Sky%20News]
and BP
[https://news.sky.com/story/bp-to-cut-4-700-jobs-and-3-000-contractor-roles-from-its-global-workforce-13290091]
are among major employers to have announced job losses since the budget.
The Treasury has consistently argued that the budget tax measures were a one-off
to help fix the public finances and allow for long overdue investment in public
services.
Its growth agenda, which includes not only infrastructure and green energy
investment but also planning reforms to help get the country building, is
expected by economists to only make a significantly positive contribution during
the second half of the parliament.
Last week, the Bank of England slashed its forecast for UK growth this year from
1.5% to 0.75% as it expected the national insurance rise
[https://news.sky.com/story/chancellor-admits-it-wont-be-easy-for-business-to-absorb-costs-of-national-insurance-hike-13266206]
to weigh on activity, in particular by pulling down employment.
It said it was too early to gauge the potential threats from trade tariffs
imposed, and threatened, by Donald Trump in the United States but warned that
such protectionism was generally negative for economic growth.
