Hiring freezes and cost-cutting lead to further job market slide

Economic instability, marked by hiring freezes and cost-cutting measures, has led to a downturn in the job market, with recruitment analysts noting a significant and ongoing drop in permanent job placements.

New findings from KPMG and REC's UK Report on Jobs indicate that March marked the fifth consecutive month of decline in the full-time job market, characterised by reduced staff demand and an increase in redundancies nationwide.

Furthermore, there has been a slowdown in pay growth, with starting salaries for permanent roles increasing at the slowest pace in more than three years. This trend reflects organisations' ongoing struggles with rising interest rates and inflationary pressures.

Commenting on the findings, Jon Holt, Chief Executive and Senior Partner at KPMG UK, said: “Persistent economic uncertainty has led to many business leaders delaying major investment decisions and relying on savings for growth in the first quarter of the year.”

Tightening budgets also impacted the payroll of temporary staff in March, with wages falling its sharpest rate since July 2020.

However, Holt expressed that better times were ahead with business leaders “optimistic about the outlook improving.”

“There are still headwinds, but it’s time for the UK economy to get its groove back – and UK businesses will be ready when the Bank of England makes its interest rate cuts. This may not lead to an instant rebound, but confidence to invest will increase, improving demand, and the economic outlook should start moving in the right direction,” he said.

Derek Mackenzie, CEO of Investigo, part of The IN Group, commented: “As economic uncertainty continues to stifle the labour market, organisations need to continue to emphasise staff as a top priority and use their skills to fuel growth. In fast-moving areas such as AI and cyber, the demand for staff remains especially high, with our Tech and the Boardroom research highlighting 38% are struggling to hire skilled specialists to combat evolving threats.”

“Particularly while budgets are squeezed, organisations must turn to competitive differentiators to ensure staff are given purpose beyond just pay. Aspects such as career progression opportunities, flexible working policies, training programmes, an inclusive and supportive culture, and mentoring can all help staff feel valued and motivated, helping to attract and retain talent. The economy is undoubtedly hindering hiring policies, but failing to prioritise people during times of turbulence could hold organisations back when the outlook picks up.”

Sjuul van der Leeuw, CEO of Deployteq, part of Inspired Thinking Group, said: “Despite the job market slide, organisations must continue to be on the lookout for tech-savvy staff that can lead growth and innovation. AI isn’t slowing down for the job market, and companies that fail to find and attract staff could be left behind, especially in important sectors such as marketing technology.”

“Whether it’s overseeing generative AI content creation or data-driven marketing campaigns, brands and agencies need to invest in staff and resources that can lead innovative developments in the creative industries to give them and their campaigns a competitive edge.”

The findings come following Sadiq Khan and Rachel Reeves launching the London Growth Plan last week, aiming to create 150,000 highly skilled, highly-paid jobs in the capital by 2028.