JobsOutlook: Budget knock to employer confidence not as bad as feared - REC

The latest REC JobsOutlook shows employers' confidence in the economy slightly increased heading into the new year, suggesting that some of the gloomier UK economic forecasts, partly driven by a damaging Autumn Budget for business, may be underplaying the potential for 2025. Demand for workers is down, it's not gone, finds REC.

The survey of 634 UK employers found that perception of the UK economy’s performance, while still weak, improved by three points to (net: -25) when compared to the three months to October (net: -28). This continues a recovering trend that started in early 2023. And the surveyed employers’ perception on how the UK economy was performing was markedly better in December (net: -12), compared to just after the shock of the Autumn Budget in November (net: -39).

For 18 months, employers have been largely getting more positive about their own businesses. This took a knock in the late summer around gloomy economic predictions, and has taken a further knock from the Budget. But the effects are marginal, and seem to be recoverable. Employers’ confidence in making investment and hiring decisions fell by three points this quarter (from net: -2 to net: -5) – in contrast to the near-term peak of net: +16 in the three months to June 2024. But this fall in employers’ confidence in making investment and hiring decisions was driven by heightened post-Budget concerns in November – when the barometer dropped to net: -17 - after which it returned to positive territory (net: +2) in December.

The survey shows some signs of optimism within the job market:

• Medium size companies (50-249) were markedly more positive about intentions to hire permanent and temporary staff, than smaller and larger employers.
• Organisations in London and the Midlands were significantly more positive about short-term hiring and short-term temporary hiring. Those in the Midlands are significantly the most positive about medium-term permanent hiring.
• Private sector demand for temps in the medium-term was far stronger in the private sector than for the public sector.

Neil Carberry, REC Chief Executive, said:

“There can be no doubt that the Budget created headwinds for companies all over the country. But these data show that the economy is bigger than government policy, with employers’ confidence holding steady as we head into 2025. The growth re-set that the Chancellor has been talking about is vital to keeping up momentum now. In 2025, the government needs to be a source of tailwinds for firms as they speed for growth. A balanced view of today’s report shows there is opportunity out there for businesses and candidates alike, but more to do to grasp it. Making sure that the industrial strategy tackles long-term challenges like infrastructure, skills and taxation with more of a can-do attitude will be vital.”

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While firms are staying resilient, it is clear that the tax rises in the Budget have changes plans for some firms. Around 14% of surveyed employers highlighted plans to reduce their permanent headcount in the next three months – up from 5% in the three months to October - driven by sharp rises in intent in November and December after the Budget. A fall in medium-term permanent hiring intentions was driven by a marked deterioration in sentiment in both November and December, when the proportions planning to reduce headcount rose to 15% and 18%, respectively, from just 4% in October.

Short-term permanent hiring intentions weakened but continued to predict growth in workforces. to net: +5. This is seven points lower than the equivalent figure for the three months to October. The barometer of medium-term permanent hiring intention similarly fell across the quarter - by eight points (to net: +4) compared to the three months to October.

The balance of sentiment towards short-term use of temporary and/or contract workers turned marginally negative this quarter, falling seven points from net: +5 in the three months to October to net: -2 in the three months to December. While falling by four points this quarter, compared to the three months to October, the balance of sentiment towards planned medium-term use of temporary and/or contract workers remained marginally positive, at net: +1.

Neil Carberry said:

“The Autumn Budget’s rise in National Insurance has clearly had an impact on hiring intentions, with firms affected by the reduction in the threshold particularly hard hit. The increase in employers planning to reduce headcount is a concern, but still small at this stage.

"The UK’s labour market is among the most competitive globally, and it is only becoming more challenging. As recruitment specialists, we see that businesses must adapt their approach to make the most of their talent and the new technologies at their disposal. Hiring isn’t just a task –it should be a strategic priority. Too many companies haven’t yet grasped that."

Ends

Notes to editors:

JobsOutlook is produced by REC in partnership with Whitestone Insights. Till October 2024 it was in collaboration with Savanta ComRes, but from November 2024, to improve the sample size and the robustness of the data REC is partnered with Whitestone Insights. 634 UK employers participated via telephonic interview and online survey in the JobsOutlook survey which was conducted between 1^st October 2024 and 13^th December 2024. Data were weighted to be representative of UK adults in employment by region, broad industry sector and public/private split. Whitestone Insights is a member of the British Polling Council and abides by its rules.

Chang in collaborator and the methodology led to minor adjustments in the quarterly data. The adjustments are within the margin of error.

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The REC is the voice of the recruitment industry, speaking up for great recruiters. We drive standards and empower recruitment businesses to build better futures for great candidates and themselves. We are champions of an industry which is fundamental to the strength of the UK economy.

Find out more about the Recruitment & Employment Confederation at www.rec.uk.com.