Demand for Workers in Britain Declines

By Andy Bruce

(Reuters) – Demand for workers in Britain collapsed last month after the new Labour government's first budget, a survey published on Monday showed, adding to other signs of the impact of the tax increases on employers.

The Recruitment and Employment Confederation trade body and accountants KPMG reported that their index of demand for staff slid to 43.9, the lowest reading since August 2020, down from 46.1 in October.

Only the COVID-19 pandemic, the global financial crisis, and the immediate aftermath of the September 11 attacks on the United States resulted in worse readings.

Permanent staff placements fell in November at the fastest rate since August 2023, although the pace of decline for temporary workers eased slightly from October, REC said.

> "It should be a surprise to no one that firms took the time to reassess their hiring needs in November after a tough budget for employers," REC Chief Executive Neil Carberry said.

> "The real question now is whether businesses will return to the market as they go into next year with greater certainty about the path ahead."

Last week, REC issued an urgent warning over the government's separate Employment Rights Bill, which aims to reform the labour market and raise living standards, describing it as undercooked.

Finance minister Rachel Reeves, who announced her budget on October 30, hopes that Monday's survey represents a one-off dip rather than the start of a longer downturn in the labour market.

The REC survey is a diffusion index which can be prone to sharp but short moves around significant political and financial events. However, employers have indicated that the tax rises on businesses will have a deeper impact.

Last week, the Confederation of British Industry cut its estimate for economic growth next year due to the higher social security contributions, while other forecasters, such as the OECD, said that other measures in the budget would raise growth.

A Bank of England survey showed that 54% of businesses said they would respond to their higher costs from the budget by reducing employment, while 38% expected lower wages.

Separately, a survey from research company Incomes Data Research showed that the median pay deal offered by private sector employers slipped to 3.9% in the three months to October from 4.0% previously.

The Bank of England is watching for signs of diminishing inflation pressure in the labour market.

Reeves has described the budget as a one-off to fix public finances and pay for improved public services and has promised businesses stable and predictable tax policy to help them plan and invest.

Jon Holt, group chief executive of KPMG UK, mentioned that expected interest rate cuts in 2025 and the government's investment plans offered reasons for optimism.

> "This should give businesses greater confidence which may help stabilize the labour market," Holt said.