Recruitment stalls amid rising staff costs

Pre-budget nerves and mounting staff costs pushed Britain’s employers to apply the brakes on recruitment last month, data shows.

Two separate surveys issued on Monday paint a gloomy picture of the UK’s employment activity, pointing to falling output, shrinking permanent recruitment and a surge in candidate availability, underlining business concerns about the economic outlook.

A report from KPMG and the Recruitment and Employment Confederation (REC) showed permanent placements fell again in November, although at the slowest rate since July 2024, while temporary billings dipped back into contraction after a marginal rise in October.

Temporary billings are revenues that recruitment consultancies receive from placing people in temporary or contract positions.

The findings echo the latest numbers from the Office for National Statistics which showed that the rate of unemployment hit 5 per cent in the three months to September, the highest level in more than four years.

The KPMG-REC index measuring the supply of permanent jobs stood at 45.5 last month, with redundancies and fewer vacancies driving the second-fastest increase in candidate numbers since November 2020. It was a slight improvement on the figure of 45.2 for October. Any reading below 50 signifies contraction.

Lisa Fernihough, head of advisory at KPMG UK, said the figures showed the market “remains stuck in contraction”, with hiring “kept on ice” by budget uncertainty and high employment costs.

Neil Carberry, chief executive of the REC, said employers may delay major hiring decisions until January, adding that while the budget “was not the horror show of last year … there was little in it to fire the heart of firms”.

The employment index from BDO, the accounting and consulting firm, pointed to the same cautious mood. It fell from 93.95 to 93.53 in November, the index’s weakest reading since April 2011.

Businesses maintained a “low-hire, low-fire” approach to any major workforce decisions as they awaited more clarity from the budget in the second part of the month, BDO said.

BDO’s data showed activity deteriorating across the economy in November, despite it usually marking the start of the “golden quarter” for consumer spending.

Its output index dropped to 97.77 from 101.84 in October, the sharpest monthly fall since April 2022 when energy and commodity prices were surging. Services, normally a pre-Christmas bright spot, weakened significantly, with output sliding from 102.75 to 98.12 as inflation and low consumer confidence hit demand.

Scott Knight, head of growth at BDO, said: “The run-up to Christmas is usually a golden time where business booms and revenues are shored up, but so far this year it’s falling flat.

“With output down and employment the worst we’ve seen since the financial crash, the growth outlook is bleak and there was little in the budget to get things moving.”