UK businesses are keeping recruitment plans at record lows as they grapple with rising employment costs, economic uncertainty, and slowing demand — a trend hitting young workers hardest.
Three separate surveys released Monday showed declining hiring activity, weaker pay growth, and fading business confidence. Many company leaders described themselves as “stuck in limbo” while awaiting clearer signals from the government, particularly in the autumn budget.
The Chartered Institute of Personnel and Development (CIPD) found only 57% of private-sector employers plan to hire in the next three months, down from 65% in autumn 2024. The drop comes as companies absorb a £25bn rise in employer national insurance contributions (NICs) introduced in April, alongside other cost pressures.
A separate report from KPMG and the Recruitment & Employment Confederation (REC) showed July brought a sharp decline in recruitment for both permanent and temporary roles, marking the steepest fall in vacancies since April. The availability of staff rose at one of the fastest rates since records began in 1997, pushing down pay growth — with starting salaries increasing at their slowest pace in over four years.
The downturn was broad-based across sectors, with engineering the only field seeing higher demand for permanent staff. Retail saw the steepest drop in vacancies, while construction posted the smallest decline.
REC deputy chief executive Kate Shoesmith said last week’s interest rate cut — the Bank of England’s fifth in a year — was the right move and urged further measures to ease business costs. “That is what will support growth and boost the jobs market this year,” she said.
Some pockets of resilience remain: construction has seen a rise in temporary vacancies, and demand for blue-collar temp roles and permanent engineering jobs has held steady.
CIPD research found the hospitality and care sectors, along with employers of young people, have been most affected by higher costs. Over a third of firms employing under-21s reported significant cost increases from NICs changes, despite those workers being exempt from the tax. The CIPD is calling on the government to bolster youth employment and training support while ensuring changes to the employment rights bill do not further discourage hiring.
Business advisory firm BDO also reported fragile confidence in its latest monthly snapshot, citing weak GDP growth, high labour and energy costs, and continued uncertainty over US trade policy under Donald Trump’s proposed tariffs.
“There are signs of recovery, but they are fragile,” said Scott Knight, BDO’s head of growth. “Business leaders are waiting for clearer signals from the government that further investment will be worth the gamble.”