Demand for UK staff was the weakest in four years in November as budget tax increases overshadowed the pre-Christmas labor market, according to a survey of British recruiters.
KPMG and the Confederation of Employment and Employers, which released its monthly report on Monday, said the drop in its job vacancies index, from 46.1 to 43.9, indicated the sharpest decline in job openings since August 2020. The survey also showed precipitous drop in personnel placements.
Jon Holt, group managing director and UK senior partner at KPMG, said companies “must weigh up the possibility of increased costs for employees” following the rise in employers’ National Insurance contributions, which led to a “precipitous slowdown in employment activity across the sector”. .
The research confirms other business research, including the company’s latest report Bank of England‘s Decision Makers Panel, which last week showed that more than half of respondents expected to cut the number of employees in response to the increase in National Insurance.
Separate data from employment website Indeed suggests that seasonal employment is even weaker than the overall labor market, although more people than usual are looking for short-term work to supplement their income.
Ads for seasonal jobs in the first half of November were 39 percent lower than last year and 46 percent lower in the same period in 2019, Indeed data showed. Overall postings were 14 percent below the pre-pandemic average.
Economists say low consumer confidence and rising labor costs have dampened demand for seasonal workers, contradicting a wider industry review of how temporary staff are used.
“Consumers are still feeling the pressure from the cost of living, while costs for retailers have risen due to strong wage growth in the sector,” said Jack Kennedy, senior economist at Indeed.
“As retailers weigh the impact of the budget measures, they will be mindful of protecting their margins,” he added.
Meanwhile, Indeed said more job seekers are looking for seasonal work than in the previous six years. Kennedy said this reflected a weaker labor market and the continued effect of rising costs of living.
Kate Shoesmith, deputy chief executive at the REC, said pre-Christmas hiring was “muted” after a tough year for hospitality and retail.
She said employers in sectors where “staffing is the biggest cost” often seek to “maximize the number of people on variable shifts” so they can ask existing staff to work more hours instead of hiring temporary workers.
Indeed’s analysis covered hundreds of thousands of job postings across 48 sectors, including holiday terms such as “seasonal” and “Christmas.”
Retail hiring is slowing, with an average of 57,000 vacancies between August and October, according to official data – down 27 percent from 78,000 in the same period last year.
Vacancies in the accommodation and food services sector decreased by 17 percent in the same three-month period – from 113,000 in 2023 to 94,000 this year. The total number of vacancies fell by 14 percent in the same period.
Harvir Dhillon, economist at the British Retail Consortium, a trade body, said demand for labor in wholesale and retail had “cooled very significantly”, with weaker consumer demand a “big concern” for retailers.
“Food inflation remains positive, so food retailers will be in a tougher position (choosing between) raising prices versus absorbing margins,” he said, adding that non-food retailers “are likely to be subject to economic conditions and how wage growth develops “.
He added that planned increases in the cost of National Employer Insurance and the National Living Wage, announced in last month’s Budget, would put “downward pressure on employment intentions”.
Although posting trends paint a bleak picture across the sector, several of Britain’s biggest supermarket chains are employing similar numbers of temporary staff in stores, warehouses and online delivery centres, compared to last year.
Tesco, for example, said in October that it would aim to hire 26,000 staff, compared with 30,000 in 2023; Sainsbury’s aims to hire 20,000, up from 22,000; and the more luxurious Marks and Spencer chain employs 1,000 more employees than last year’s 10,000.
Kate Nicholls, chief executive of trade body UKHospitality, said bookings for the festive period were similar to previous years. But, she added, there has been a shift in the sector from temporary contracts to long-term ones.
“We’re seeing more job security, more permanent contracts but more flexible contracts, which means you’re not seeing as many adverts for Christmas-only jobs as you used to,” she said.
Additional reporting by Laura Onita.
