According to KPMG and The Recruitment and Employment Confederation’s latest report, the UK labour market experienced a softening of the decline in recruitment in February 2025.
The pace of decline has slowed down compared to the beginning of the year. The REC study said that this was the lowest drop in permanent placements seen since October last year, as employers adjusted to a weaker economy and higher payroll costs.
The overall need for staff is still low, and the number of permanent positions decreased again in February. This brings the contraction to almost two-and-a-half years.
Demand for temporary staff has also declined, but at a slower pace than in January. The temporary billings fell at the second-fastest rate since June 2020 despite an improvement from January’s record low. According to the analysis, the decline in both temporary and permanent recruitment was due to businesses’ continued caution amid uncertain economic conditions.
In February, the rate of inflation in starting salaries continued to slow down and reached its lowest level in four years. For the second month in a row, the rate of growth for starting salaries has slowed. Reports indicate that pay rates are leveling off. This trend is linked to a combination between a weaker demand for employees, heightened availability of candidates and tighter budgets in businesses.
The number of applicants for permanent and temporary positions increased at an accelerated pace during the month. The slowing economy was responsible for the increase in redundancies, and there were fewer opportunities to find a job. The increase in workers’ availability is consistent with trends that will continue through 2024, as businesses continue to reduce their hiring efforts.
Regional data showed that all four English regions experienced a decrease in permanent staffing, with the North of England seeing the largest drop. London had the largest decline in temporary staffing billings. The Midlands experienced the smallest reduction.
In the public sector, the decline in vacancies was the greatest, especially for temporary positions, where the contraction was the largest since June 2020. The private sector also saw a decline in demand, but at a more moderate rate. Both permanent and temporary positions were affected.
The study found that the panellists of the REC frequently cited redundancies as well as a lack in job opportunities, which had led to an increase in the number of workers available.
Midway through the first three months, short-term/contract worker availability also increased more rapidly. According to recruiters, layoffs at companies and a decrease in short-term positions had increased the availability of temporary workers.
Jon Holt said that the softening of the decline could be an indication of expectations of more interest rate reductions and better than anticipated recent economic data.
“Pressures on Business”
Well-capitalised businesses would “look for signals that support future planning and grow, and this will bring confidence to invest and to create jobs.”
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Neil Carberry, chief executive of the REC, said that the upcoming national insurance increase for employers as well as the Employment Rights Bill may act as a brake to growth. However, there are “some hints” as we move into spring about a change in the labor market. The private sector is leading the way – despite recent increases in tax – and this should not be missed.
