UK jobs market slowdown sees pay growth ease as candidate supply rises

Recruitment activity across the UK continued to decline sharply at the start of the third quarter, according to the latest KPMG and REC UK Report on Jobs survey, compiled by S&P Global.

Both permanent placements and temp billings fell, with respondents linking the drop to weak employer confidence, economic uncertainty and tighter recruitment budgets.

The survey also recorded the steepest fall in overall vacancies since April, while staff availability rose at one of the fastest rates since the series began in 1997, often attributed to redundancies and concerns over job security.

An increased talent pool and budget constraints contributed to slower pay growth, with starting salaries rising at their weakest rate since March 2021.

Temp pay growth also eased to a five-month low.

Jon Holt, group chief executive and UK senior partner at KPMG, said: “The labour market cooled in July as chief execs held back from increasing their recruitment budgets.

“Economic uncertainty, the complexities of AI adoption and global headwinds are all weighing on business planning.

“A larger talent pool has helped temper wage inflation, which helped convince the Bank of England to cut interest rates.

“While UK plc remains resilient, a further loosening of monetary policy could help boost business confidence.

“But many firms will continue to pause major investment decisions until there is greater clarity in the Autumn.”

Kate Shoesmith, REC deputy chief executive, said: “With starting salaries and temp pay rising only modestly, it was right to cut interest rates last week.