Hiring intentions among British businesses remain at a record low as they grapple with rising employment costs and economic uncertainty, according to three separate surveys released on Monday. The Chartered Institute of Personnel and Development (CIPD) found that only 57% of private sector employers plan to recruit in the next three months, down from 65% in autumn 2024, as they contend with a £25bn rise in employer national insurance contributions (NICs) that took effect in April and other rising costs.
The KPMG and Recruitment and Employment Confederation (REC) report showed a sharp fall in recruitment for both permanent and temporary jobs in July, with vacancies dropping at the steepest rate since April. Staff availability increased at among the fastest rates since the survey began in 1997, while starting salaries rose at the weakest rate in nearly four and a half years. Demand for permanent staff fell across all sectors except engineering, with retail experiencing a rapid decline and construction the smallest drop.
Kate Shoesmith, REC deputy chief executive, noted that modest pay growth justified last week's interest rate cut by the Bank of England. She called for further action to stabilise business costs, urging the chancellor to keep this in mind for the autumn budget. The Bank cut rates for the fifth time in a year on Thursday, warning that rising food prices could push inflation to 4%.
The hospitality and care sectors, along with organisations hiring young people, have been hardest hit by rising employment costs. The CIPD reported that 37% of employers who hire under-21s saw a large increase in costs due to NICs changes, compared with 23% of those who do not, despite under-21s being exempt from employer NICs. The CIPD urged the government to support youth employment and ensure proposed changes to the employment rights bill do not hinder recruitment.
James Cockett, senior labour market economist at the CIPD, said: "Business confidence is faltering further under rising employment costs." Meanwhile, BDO's monthly snapshot highlighted weak GDP growth, high labour and energy costs, and ongoing uncertainty around US tariffs as factors weighing on confidence. Scott Knight, head of growth at BDO, commented: "There are signs of recovery but they are fragile… Business leaders are stuck in limbo, waiting for clearer signals from the government."
