UK Job Market Grinds to a Halt: Hiring Freeze Hits as Costs Soar & Demand Tanks

Britain's employment engine is sputtering. Companies are slamming the brakes on hiring—and the dual punch of inflationary pressures and consumer retreat isn't helping.

The cost crunch bites back

Businesses aren't playing defense—they're in full retreat. With operational expenses ballooning and revenue projections shrinking, open reqs are getting axed faster than a metaverse startup's budget.

Demand drought deepens

When consumers tighten belts, hiring managers tighten purse strings. The UK's service sector—once a jobs powerhouse—now mirrors the enthusiasm of a crypto bro at a SEC hearing.

Welcome to the great stagnation. Where 'growth opportunities' mean your coffee shop loyalty card—and 'market correction' is just corporate speak for battening down the hatches. (Bonus jab: At least the Bank of England can't blame crypto this time.)

Hiring freeze looms as rising costs and weak demand stall UK job market

A Chartered Institute of Personnel and Development (CIPD) survey found that only one in four employers plan to hire staff in the next three months. Just 16% expect to reduce headcount, and most of those cuts are likely to be cautious and measured.

This is a slight diminishing of momentum, especially in the private sector. While a strong rebound in recruitment occurred late last year, there has been little movement since, and employers’ hiring intentions are hovering around COVID-19 pandemic lows. At the sharp end are the hospitality, retail, and social care sectors, where employers typically face low wage bills and temporarily employ workers coming to Britain in their hundreds of thousands

Rising employment costs are a major factor. The April increase in employers’ national insurance contributions has hit labour-intensive businesses the hardest, adding to tight margins. For small businesses, these additional costs have left little room to take on new staff, forcing some to freeze recruitment or consider redundancies.

Much of the pressure to conform is also driven by policy changes. Tax hikes have already squeezed labour budgets this year, according to a separate report by accountancy and business advisory firm BDO, which found that increases in the national minimum wage had been accompanied by real-time information confirming that millions of employees were now in work. Scores of other employers are now preparing for a fresh squeeze on their finances ahead of the government’s Autumn Statement, where extra fiscal measures are anticipated.

The picture thus far: rising costs, weaker demand, and continued uncertainty have made for a tough environment for hiring managers. And economists warn that without targeted support or incentives, many businesses will postpone hiring plans well into 2025, which could drag down the broader economic recovery.

Economists question jobs data as UK labour market sends mixed signals

While surveys point to a cooling jobs market, the official data tells a mixed story. Payroll figures from HMRC show the number of employees has fallen slightly over the past year, though revisions have softened the decline.

Meanwhile, the ONS data indicate that employment and unemployment are both on the rise, while economic inactivity is on a downward trend. Prime Minister Sir Keir Starmer recently used the latest statistics to show that the economy is bringing more people back to work under the government’s “back to work” scheme.

However, several economists suggest that the ONS could be getting their counting wrong, and there was no sign of a substantial lift-off in employment.

Last week, Bank of England governor Andrew Bailey indicated that the demand for labour declined, but suggested it is an impossibly uncertain time given the terrible data.

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