Hopes for a sustained rebound in UK hiring are facing fresh uncertainty as employer confidence falters, amid concerns over rising payroll taxes and new employment legislation. This is according to the latest report from the Recruitment & Employment Confederation (REC), released Thursday.
The REC’s quarterly survey found that while short- and medium-term hiring intentions improved in the three months to April, overall business confidence declined sharply. The group’s economic confidence index dropped by 12 points to a net minus 35 — a sign of growing unease among employers about the country’s economic prospects. Meanwhile, the investment intentions index also slipped, falling five points to minus 9.
“Firms clearly see potential, but they also see risk,” said Kate Shoesmith, deputy chief executive at the REC. “While improving hiring intentions suggest a jobs comeback this year, the extent of any bounce back depends on the economic and political headwinds on firms easing a fair bit.”
April brought significant cost pressures for employers. The main rate of national insurance contributions (NICs) rose from 13.8% to 15%, while the earnings threshold at which NICs apply dropped from £9,100 to £5,000. Together, these changes add around £25 billion to business payroll costs. On top of this, the national minimum wage increased by 6.7%, impacting sectors such as hospitality, care, and retail that depend heavily on lower-paid, part-time workers.
Despite these challenges, some analysts caution against overstating their impact. While sentiment surveys suggest employers may slow hiring, the NICs hike amounts to less than 1% of GDP, which many firms could absorb.
Adding to employer concerns is the government’s new Employment Rights Bill, currently moving through the House of Lords. The legislation seeks to expand access to sick pay, support trade union membership, and provide more predictable working hours. Unions have praised the bill as a major win for workers, but business groups warn it could raise compliance costs and create new regulatory burdens.
“Getting the Employment Rights Bill right will help,” said Shoesmith. “Firms want reassurance that the application of the bill avoids tying businesses and workers up in greater costs and complexity.”
Despite the dip in confidence, the labour market remains resilient. The Office for National Statistics (ONS) reports 761,000 job vacancies in the three months to April — down from the mid-2022 peak of 1.3 million but still elevated by historical standards. The unemployment rate stands at 4.5%, although recent doubts have been raised about the reliability of ONS data due to lower survey response rates.
With GDP growing 0.7% in the first quarter — outpacing expectations — the next few months could prove decisive. The REC warns that whether the UK’s jobs market continues to recover may depend as much on political clarity as economic momentum.
“The bounce-back is possible,” Shoesmith said, “but far from guaranteed.”
