Zarah ChoudharyThe KPMG and REC UK ‘Report on Jobs’ survey, compiled by S&P Global, has signalled deterioration in the UK labour market at the start of 2025, with permanent placements and temp billings falling sharply.
Temp billings declined at the fastest rate since June 2020, while vacancies dropped to their greatest degree since August 2020.
The report, based on responses from 400 UK recruitment and employment consultancies, highlighted ongoing business uncertainty and the impact of higher employment costs on hiring activity.
Recruitment consultants reported redundancies at client firms and continued reluctance to hire due to rising employment costs linked to government policies.
January marked the 28th consecutive month of contraction, with permanent placements declining at a similar pace to December’s 16-month record.
Temp billings saw the sharpest decline in over four-and-a-half years, with the rate of contraction accelerating.
Permanent salary growth weakened, remaining modest and well below the historical trend.
While firms continued to offer higher salaries for strong candidates, rising staff availability placed downward pressure on pay growth.
Temporary wage inflation also slowed, marking the weakest increase in the current four-month growth sequence.
Demand for staff continued to decline, with vacancies falling at the steepest rate since August 2020.
Permanent job vacancies contracted for the fifth consecutive month, reaching a near four-and-a-half-year peak.
Temporary vacancies also fell at the sharpest pace recorded since June 2020.
Redundancies contributed to an increase in staff availability, though the rate of growth softened compared to December, reaching the slowest increase in nearly a year.
Regionally, the North of England saw the steepest decline in permanent placements, with all other regions also reporting sharp reductions.
Temporary billings fell across all English regions except the Midlands, with the South of England and London experiencing the most significant declines.
Permanent staff vacancies fell across all job categories, with the sharpest contraction in the Executive/Professional sector, followed by Secretarial/Clerical.
Temporary vacancies also declined across all sub-sectors, with the Executive/Professional category recording the most significant drop.
Jon Holt, group chief executive and UK senior partner KPMG, said: “Businesses continue to hold back on recruitment, leading to permanent and temporary placements falling steeply again in January.
“While firms are still willing to pay for top talent, increased staff availability weighed on pay growth. This cooling may have encouraged the Bank of England’s decision to cut rates last week.
“It is unlikely that we will see any significant improvements in the survey data over the near term, as hiring stays muted and staff availability continues to rise. Yet business leaders are ready for growth signals and gradual rate cuts could start to translate into greater confidence to plan and invest.”
Neil Carberry, chief executive at REC, said: “Businesses entered the year uncertain on the growth path, and that has driven a “wait and see” approach to hiring.
“Around the country, REC members report that clients have plans and are hopeful for the year ahead – but firms are slowing investment until they see more momentum in the economy.
“Last week’s move on interest rates was timely as a way of boosting confidence.
“The more central role of growth in Government thinking since the Chancellor’s speech last month will also help.
“But it takes time, and real action, to build business confidence.
“An autumn of fiscal gloom, difficulty navigating significant upcoming tax rises and little progress on the practicalities of a costly new approach to employment rights are all acting as brakes on progress.
“As well as the monetary stimulus to growth, it’s time for greater clarity on how the Government will use its industrial strategy to drive the growth of the whole economy.”
