Budget tax rises will ‘dampen hiring’ as jobs market remains muted
Budget uncertainty contributed to weaker activity in the jobs market last month, a survey suggests, as firms delayed hiring decisions in the run-up to last week’s fiscal event.
The latest report on jobs from KPMG and the Recruitment and Employment Confederation (REC) showed that the number of staff appointments in October fell to its lowest level since March.
The survey pointed to “recruitment freezes” at firms ahead of the Budget as a partial explanation for the contraction.
The number of vacancies also declined again last month, extending the run of contraction to an entire year. Indeed, the rate of contraction picked up to its steepest pace since January 2021.
“Uncertainty over the Autumn Budget saw businesses continue to put hiring plans on hold during October,” Jon Holt, chief executive at KPMG UK, said.
He warned that the measures announced in the Budget could “further dampen hiring as companies grapple with absorbing any extra costs”.
The Chancellor announced tax rises worth £40bn last week, making it the biggest tax-raising fiscal event since 1993.
Changes to employers’ national insurance made up over half of the total tax increase, with Reeves hiking employers’ contributions by 1.2 per cent and cutting the threshold at which businesses start paying the levy.
Many business groups criticised the levy as a tax on jobs, warning that it would put up costs and slow the pace of hiring.
The survey also showed that staff availability continued to “increase steeply” during October due to lower demand for workers and reports of redundancies.
With more candidates competing for fewer roles, the survey showed that wage growth fell for a fourth successive month, dropping to its lowest level since February 2021.
“Where pay increased, this was linked to competition for high quality candidates in key roles,” the report noted.
Neil Carberry, chief executive of the REC, said there was “little in the pay data” which suggests the Bank of England should refrain from further rate cuts.