UK firms pause recruitment as Budget uncertainty and policy shifts weigh on hiring

British employers have halted or slowed recruitment amid mounting concern over the autumn Budget and a raft of policy changes, a report from accountancy group KPMG and the Recruitment and Employment Confederation (REC) said on Monday.

The KPMG-REC study found the number of people looking for work is rising at its fastest rate since November 2020, as firms shed staff and put hiring on hold. The report said the shift in recruitment patterns is being driven by uncertainty about Labour government policy, higher labour costs and the rapid adoption of new technologies.

KPMG warned that "speculation" about the government’s Budget plans—including forecasts of higher taxes and increased borrowing—meant job prospects were unlikely to improve in the near term. Jon Holt, chief executive and senior partner at KPMG UK, said businesses were reassessing investment and recruitment decisions in response to policy commitments and the rapid pace of change brought by artificial intelligence and other technologies.

Neil Carberry, chief executive of the REC, urged the Chancellor to avoid measures that would add to hiring costs. "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," he said, adding that the Budget should recognise the need for investment in people if the economy is to recover.

The report arrives against a backdrop of weak economic growth, a rise in unemployment and a renewed surge in inflation. The Bank of England has warned that jobs are being cut at a pace not seen since 2021, while concerns about the fiscal outlook have pushed UK government borrowing costs higher on global bond markets.

Businesses cited several specific pressures. The report identified a planned increase in National Insurance contributions, estimated at roughly £25 billion, as a factor weighing on employers. Firms also highlighted an expected inflation-related rise in the minimum wage and potential new obligations from a workers’ rights bill championed by Deputy Prime Minister Angela Rayner, who was forced to resign from government last week.

Accountancy and professional services firms signalled changes to graduate recruitment and early-career hiring. Marco Amitrano, head of PwC UK, told the Sunday Times he expected to hire fewer graduates this year. The KPMG-REC report said some employers are turning to AI and automation to reduce headcount or reshape roles, while others are postponing hiring until there is greater clarity on the fiscal position.

Analysts and industry groups pointed to the timing of the Budget as a key factor. The Chancellor is due to set out fiscal plans on November 26; independent estimates of any shortfall in public finances range from about £20 billion to as much as £50 billion. Such a gap would influence the scale and speed of policy measures, and businesses say the uncertainty is prompting caution.

Recruitment freezes and delayed hiring decisions are likely to have a direct effect on labour market dynamics in the coming months, the report said, as employers balance immediate cost pressures against the need to secure skills for recovery. The KPMG-REC findings underscore growing concern in the private sector that policy uncertainty, combined with rapid technological change, could slow the labour market’s recovery and weigh on investment plans.