UK firms pause hiring amid rising costs

Britain’s hiring plans shrink as costs rise and the economic outlook stays uncertain, hitting young workers hardest.

UK firms pause hiring amid rising costs and cloudy outlook

Three surveys released on Monday show hiring intentions in Britain at a record low as employers grapple with higher costs and a murky outlook. The CIPD reports that only 57% of private sector employers plan to recruit in the next three months, down from 65% in autumn 2024, after a £25bn rise in employer national insurance contributions took effect in April and other costs climbed.

The KPMG and REC findings confirm weaker recruitment in July for both permanent and temporary roles. Vacancies fell steeply while the pool of available staff rose, the sharpest shift since the survey began in 1997. Starting salaries rose at the weakest pace in almost four and a half years, and demand for permanent staff fell across most categories, except engineering. Construction showed relative resilience, while hospitality and care sectors bore the heaviest burden from higher costs and a weak jobs market. CIPD notes a larger impact on young workers, with about 37% of employers hiring under 21 reporting higher costs due to NIC changes, compared with 23% of those who do not hire young workers.

The data sketch a fragile path for the economy. Firms face higher employment costs just as political and budget signals loom. A thoughtful autumn budget could ease hiring pressures and turbocharge youth recruitment, but policy needs to target cost relief without reigniting inflation. The Bank of England’s rate cut provides temporary relief, yet persistent cost pressures and weak demand risk leaving the labor market stuck in limbo. If policy signals align with business needs, the recovery could gain a foothold; if not, youth unemployment may deepen and the recovery could stall.

Highlights

What happens next will hinge on policy choices and the ability of firms to plan around cost changes.