UK wage growth stalls as hiring slowdown deepens

UK wages barely grew last month, according to the latest survey by the Recruitment & Employment Confederation (REC) and KPMG, highlighting a labour market still feeling the effects of economic uncertainty.

The report indicates that the starting salaries for permanent employees increased slightly from the four-and-a-half-year low recorded in September. At this time, demand for employees continued to decrease drastically, while the number of job seekers rose substantially.

This observation was noted after a report from a closely followed survey indicated that UK wages showed little improvement in October. It also acknowledged that this finding may reassure the Bank of England that inflation pressures are beginning to reduce.

“Recruiters frequently mentioned raising salaries to attract top candidates. However, there were also many reports of wages either stabilizing or even decreasing due to weaker market conditions and budget constraints faced by clients,” the report stated on Friday, November 14.

Modest wage uptick keeps UK firms wary

Economists mentioned that wage trends will be crucial for Bank of England policymakers during their meeting in December to help them consider whether to reduce interest rates.

Currently, policymakers are taking into account more indications for wage hikes, and other factors that have been keeping inflation high are now beginning to drop. This is after they narrowly decided to maintain rates unchanged during their last meeting.

Regarding the REC’s recent report, sources mentioned that this report adds to a sense of caution among businesses as they get ready for expected tax hikes in the upcoming budget. However, analysts conducted research and discovered that some signs of hiring slowdowns are starting to improve. 

Their discovery was noted after sources highlighted that the number of job openings and permanent placements in the country dropped at a slightly slower rate. At the same time, temporary billing surged for the first time since June 2024. 

Jon Holt, Group Chief Executive and UK Senior Partner at KPMG, commented on the topic of discussion. Holt mentioned that, “Economic uncertainty still heavily impacts businesses, but last month’s improvement in the jobs market suggests that a budget focused on boosting business confidence could lead to more hiring.”

When reporters reached out to several business groups to weigh in on the situation, they pointed to the £26 billion rise, equivalent to approximately $34.4 billion, in payroll taxes made public by labour a year ago, as the primary factor behind the job losses and rising inflation.

In the meantime, it is worth noting that the Chancellor of the Exchequer, Rachel Reeves, is just two weeks away from presenting another challenging budget that is anticipated to impact everyone. According to sources close to the matter, this budget may have a significant impact on the job market as it begins to recover from its challenging times.

Neil Carberry, chief executive at REC, stated that this is not the first time to experienced such a situation. According to Carberry, a similar feeling was encountered in the jobs market before last year’s Halloween Budget from the Chancellor. He argued that, as businesses cautioned back then, they experienced higher unemployment and layoffs. Therefore, the chief executive warned that as they approach Budget 2025, they cannot afford to go through this situation again. 

Reeves aims to close an expanding gap in the UK’s public finances

Reports dated Monday, November 10, highlighted that Reeves is attempting to close an expanding gap in the UK’s public finances that she thinks has been made worse by US President Donald Trump’s trade war, global conflicts, and the downgrading of UK productivity by the Office for Budget Responsibility (OBR).

According to the Chancellor of the Exchequer, this situation has restricted her financial options. Therefore, Reeves argues that she has to account for taxes and spending in her November 26th budget.

At this time, she was due to receive the last economic forecast from the Office for Budget Responsibility, the government’s watchdog. This report was anticipated to include specifics about the size of the budget gap that Reeves needs to cover.

Reeves previously mentioned that she is seeking a larger financial buffer than the £9.9 billion ($13 billion) she had in her 2024 budget and again in her spring statement in March.

If you're reading this, you’re already ahead. Stay there with our newsletter.