The UK labour market experienced its most significant increase in jobseekers since December 2020 last month, as a combination of declining job vacancies and a rise in redundancies drove more people into the employment market, according to new data from KPMG and the Recruitment and Employment Confederation (REC).
March saw a notable jump in staff availability, with the permanent staff index rising to 63.2 from 59.2 in February. Temporary staff availability also climbed, reaching 60.2, up from 59.6 the previous month. Any figure above 50 indicates an increase in availability.
The data reflects a broader trend of cautious hiring, as employers remain wary amid persistent economic uncertainty, rising employment costs, and constrained recruitment budgets. While there was a modest uptick in the vacancy index to 44.2, from 41.8 in February, it remains well below the 50 threshold, signalling an ongoing contraction in demand for new hires.
Despite subdued hiring, wage inflation saw a slight increase compared to February’s four-year low. Recruiters noted that some companies are raising salaries to attract skilled candidates, although tighter budgets and muted demand continue to suppress broader salary growth.
Jon Holt, UK senior partner and group chief executive at KPMG, commented: “At a time when global uncertainty is peaking and businesses are assessing the impact of market volatility alongside rising employment costs, the latest data demonstrates how the economic reality continues to weigh heavy on the labour market.”
The recent slowdown in recruitment activity has been compounded by additional economic pressures. April ushered in higher payroll costs, with the national minimum wage rising by 6.7% and employer National Insurance contributions increasing from 13.8% to 15% following changes in the autumn budget.
Neil Carberry, chief executive of REC, acknowledged the challenging climate but struck a cautiously optimistic note: “Given the substantial effects of the government’s decision to increase payroll taxes hugely, these figures were if anything slightly better than expected and suggest that there is potential in the market. Nevertheless, activity in the UK jobs market has now been subdued for almost two and a half years.”
Permanent placements have declined each month over that period, highlighting the continued fragility of the labour market despite stability in other areas of the economy.
The findings come as the Office for National Statistics (ONS) confirmed delays in its revamped labour market survey, now not expected until 2027. The current system has faced criticism over falling response rates and unreliable data, complicating efforts by the Bank of England and policymakers to set interest rates and develop effective employment strategies.
With jobseeker numbers rising and employer confidence shaken, business leaders are calling for a clearer, more targeted approach to labour market policy, particularly as regulatory and fiscal burdens continue to mount.
