Hiring plans hit record low over Reeves tax raid fears
On Monday, data from the Chartered Institute of Personnel and Development (CIPD) showed just 57pc of private sector firms planned to hire staff over the next three months – the lowest level since the survey began in 2016 outside of the pandemic.
The figures underscore the gloomy mood among employers ahead of the Chancellor's set piece Budget this autumn.
Ms Reeves could be forced to raise taxes by as much as £50bn, delivering a fresh blow to an already fragile economy and putting fresh pressure on employers still reeling from the £25bn National Insurance raid in the 2024 Budget.
According to the CIPD poll of 2,000 companies, the number of private sector employers planning to recruit staff in the next three months fell to just 57pc last month from 65pc in autumn 2024. This is the lowest outside the pandemic, when 34pc planned to hire.
A separate CIPD measure, which subtracts how many companies plan to hire from the share who are cutting staff, also plumbed fresh lows in July, with only a marginal improvement to nine percentage points, up from eight in spring.
James Cockett, senior labour market economist at the CIPD, said business confidence was 'faltering further under rising employment costs,' particularly in sectors that traditionally offer vital early career opportunities.
He also raised concerns about the Government's forthcoming Employment Rights Bill, which he said could add further complexity and cost to the hiring process.
'If new employment laws increase the risk and complexity of recruiting and managing new staff,' Cockett noted, 'employers are less likely to take a chance on young workers with limited experience and more development needs.'
Bleak mood among employers
The bleak economic picture was compounded on Monday by separate figures from KPMG and REC, which showed a steep drop in retail and hospitality job vacancies during July, as employers hit pause on hiring amid mounting cost pressures.
Recruiters cited weak confidence in the economic outlook and rising payroll costs as key reasons behind the slowdown, while temporary hiring also fell at its fastest rate in five months.
Jon Holt, chief executive at KPMG, said 'Many firms will continue to pause major investment decisions until there is greater clarity in the autumn.'
Employers are struggling to overcome last year's tax rise, a large inflation-busting jump in the minimum wage and wider global nervousness sparked by Donald Trump's erratic trade war.
The data offers a stark reflection of the mood among employers, particularly in sectors like retail and hospitality, where businesses are also grappling with looming regulatory upheaval.
Kate Shoesmith, deputy chief executive of the Recruitment & Employment Confederation, warned: 'Hiring in retail and hospitality is down. Employers in these sectors are pausing due to cost pressures and uncertainty around employment law.'
Nearly four in 10 firms that hire under-21s say recent changes to National Insurance contributions (NICs) have significantly raised their employment costs – despite younger workers being formally exempt.
It comes after the minimum wage for 18 to 20-year-olds rose by 16.3pc in April, a 12.7pc boost in real terms, making employing young people far more expensive than previously.
Labour market caution comes after Ms Reeves confirmed in last year's autumn Budget that employers' NICs would rise from 13.8pc to 15pc starting April 2025. This increase is adding further strain on sectors already vulnerable to wage pressures and big seasonal swings.
According to UK Hospitality, the drastic decrease in vacancies results from changes to NICs, particularly the lowering of the threshold in last year's Budget which resulted in £3.4bn in annual cost for hospitality businesses. Since that announcement, 84,000 jobs have been lost in the sector.'
A Treasury spokesman said: '380,000 jobs have been created since the start of this parliament; real wages rose more in the first ten months of this government than over the first 10 years of the previous government, and business confidence is the highest in 10 years according to a recent Lloyds Bank survey.
'Since the election, we have struck three major trade deals with the EU, US and India, business rates are being reformed, and corporation tax is capped at 25pc.
'This is how we are delivering on our Plan for Change to kickstart economic growth and put more money into working people's pockets.'
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