UK Sees Fastest Decline in Permanent Job Vacancies in Four Years
UK Sees Fastest Decline in Permanent Job Vacancies in Four Years.
Job market statistics intensify the prevailing pessimism surrounding UK businesses, as analysts prepare to closely examine the impact of the increase in National Insurance Contributions on employment practices.
Last month, vacancies for permanent positions in the UK experienced their most significant decline in four years, as indicated by a recent survey that reflects the prevailing pessimistic economic sentiment.
In the context of volatile markets and disappointing economic indicators, the monthly employment report from KPMG and the recruitment agency REC reveals that numerous companies are hesitant to expand their workforce.
The employer survey highlighted that the drop in permanent job vacancies was the steepest since August 2020, a period marked by the Covid pandemic's impact on the economy. Additionally, temporary job vacancies also saw a decrease in December.
The labour market has been experiencing a slowdown throughout much of 2024, with December marking the 14th consecutive month of reported declines in overall job vacancies.
The most pronounced reductions in permanent job vacancies were observed in the executive/professional and IT/computing sectors.
Certain employers, especially within the hospitality and retail industries, have expressed concerns that the government's impending £25 billion increase in national insurance contributions (NICs), set to take effect in April, will further hinder hiring efforts.
Jon Holt, the group chief executive of KPMG, stated: “As we start the new year, it’s a muted one for the UK jobs market. The hiring market could continue to show signs of caution in the short term, as businesses pause to take stock of higher employment costs, a more gradual pace of interest rate cuts and rising inflation.”
He indicated that the circumstances might enhance in the upcoming months. The survey revealed that wage inflation is persistently rising, reaching its highest rate since August 2024, which demonstrates that there remains a demand for labor.
“As 2025 progresses and UK economic growth picks up, businesses will need new talent. Salary inflation being at its steepest in four months shows they are still willing to compete for it,” Holt said.
Policymakers are closely monitoring the impact of the increase in employers' National Insurance Contributions (NICs), which is the primary revenue source in Rachel Reeves's October budget, on hiring and inflation in the upcoming months. The Bank of England indicated last month that government policy decisions have introduced "additional uncertainties" regarding the economic outlook.
Simultaneously, a recent bond sell-off in financial markets has resulted in the yield on 10-year government bonds surpassing 4.8%, marking its highest level since the global financial crisis of 2008, thereby raising new concerns about the state of public finances.
The Office for Budget Responsibility (OBR) is in the process of preparing a new economic forecast, scheduled for release on 26 March. The Chancellor will need to address the OBR's projections and may be compelled to reduce spending if the report indicates a potential breach of her self-imposed fiscal rules.
The latest inflation figures are set to be released next week.
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Despite the challenges faced by the UK job market, there are reasons for cautious optimism. The rise in wage inflation and ongoing demand for labor suggest that businesses remain competitive in attracting talent, particularly in sectors where skilled workers are in high demand.
While the reduction in permanent job vacancies is a concerning trend, it is important to recognize that the economy is still adjusting to various factors, including national insurance increases and rising inflation. As the year progresses, economic growth is expected to improve, and businesses will likely resume hiring efforts, creating new opportunities in the job market.
