Firms Halt Hiring as Budget Uncertainty Fuels Sharp Rise in Jobseekers

Companies across the UK are pausing recruitment and shedding staff as uncertainty over the Autumn Budget and Labour’s policy plans pushes the number of people looking for work to its fastest rise since November 2020, a joint report from KPMG and the Recruitment and Employment Confederation (REC) said on Sunday.

The KPMG-REC analysis said speculation about further tax rises, larger borrowing and regulatory changes had prompted many employers to delay hiring decisions, while rising inflation, a jump in labour costs and the adoption of new technologies were also weighing on recruitment. The rise in jobseekers comes amid weak economic growth, a fresh surge in inflation and a warning from the Bank of England that jobs are being axed at a pace not seen since 2021.

Jon Holt, chief executive and senior partner at KPMG in the UK, said employers were reassessing investment and hiring decisions in the face of both policy uncertainty and rapid technological change. "It's unlikely we'll see a significant shift in recruitment patterns in the near term as businesses evaluate their investment strategies in response to policy commitments and the rapid pace of change brought by AI and new technologies," he said.

Neil Carberry, chief executive of the REC, urged Chancellor Rachel Reeves not to impose measures that would further damage the labour market when she delivers the Autumn Budget on Nov. 26. "All eyes are now on the Autumn Budget, in hope that the Chancellor won't do any further damage to the labour market with costs on hiring. For the economy to thrive, the Budget must recognise the need for investment in people," he said.

The report highlighted particular concerns among businesses about Labour's planned policies, including a £25 billion National Insurance rise announced earlier and a planned increase in the national minimum wage. Firms also cited uncertainty over a forthcoming workers' rights bill, championed by Deputy Leader Angela Rayner, who was forced to quit the government last week.

Accountancy firms and other employers said they were responding by cutting or delaying graduate and entry-level hiring and exploring labour-saving tools such as artificial intelligence. Marco Amitrano, chief executive of PwC UK, told the Sunday Times he planned to hire fewer graduates this year as firms "watch and wait".

Market response to the uncertainty has added to the pressure, with government borrowing costs rising on global bond markets amid questions over how large a hole the Treasury must fill. Estimates of the Budget shortfall vary; analysts and political commentators have suggested a range between about £20 billion and as much as £50 billion.

The KPMG-REC report said that the increase in people seeking work is the fastest since the immediate economic shock of the COVID-19 pandemic in late 2020, driven by a combination of redundancies and firms putting recruitment on hold. Those pressures come against a backdrop of slowing economic activity and sustained inflation, which together complicate decisions for businesses on hiring and investment.

The warnings add to a string of recent indicators pointing to labour market softening. The Bank of England has signalled that employment conditions are easing and that redundancies are occurring at a rate not seen since 2021, a development that could influence the central bank's policy calculations on interest rates.

With the Autumn Budget now less than three months away, employers and recruitment agencies said they were seeking clarity on fiscal measures that could affect labour costs and investment decisions. The KPMG-REC findings underline how fiscal policy, labour regulation and technological change are intersecting to shape hiring patterns in the near term.