Appetite for hiring among employers has fallen to lows not seen since 2012, as bosses bring up the drawbridge following bruising hikes to business rates and more tax rises looming at the next Budget.
Research from the BDO Business Trends barometer found that firms are “holding back recruitment” despite indications of a summer recovery.
Employment is “stagnant” in spite of green shoots for businesses in terms of output, with a 109,000 drop in May of those currently on payroll “amid policy uncertainty and elevated cost pressures”.
It remains to be seen what impact the government’s u-turn on its welfare package will have on business confidence, as this survey of 4,000 companies was carried out beforehand.
City analysts have warned that Starmer’s about turn on proposed welfare cuts will mean a £30bn tax raid.
Scott Knight, Head of Growth at BDO, said: “We’re seeing early signs of recovery in business output, largely down to the services sector who have buoyed the economy for a second month in a row.”
Taxed into decline?
Although the BDO notes that hospitality has boosted the economy during a particularly hot May and June – with summer sporting and music events boosting spending – the jobs market in the sector continues to slump.
Elsewhere, the CBI (Confederation of British Industry) pinned cuts to hiring and headcount in the financial sector on declining business output and an ongoing profit crunch.
In concerning numbers for the industry, the industry body found that the proportion of those reporting a dip in headcount had ballooned from 2 per cent in March to minus seven per cent in June.
And 52 per cent of respondents expect reduced headcount by September, amid “heightened economic uncertainty” in the wake of last October’s Budget.
The CBI’s deputy chief economist Alpesh Paleja said: “Conditions deteriorated in the financial services sector over the second quarter, with business volumes falling at their fastest pace since late 2023 and sentiment dropping sharply.
“Firms … expect to cut back on hiring and investment going forward.”
City AM reported last week that hospitality had shed 69,000 jobs since Rachel Reeves’s hikes to NICs (national insurance contributions) came into effect in April.
Meanwhile, Liberal Democrat MP Alistair Carmichael warned: “Hospitality is being taxed out of existence, and that is a political choice we need to change.”
