As uncertainty surrounding the upcoming budget persists, the latest data indicates a significant decrease in new hiring, marking the largest drop since March. This downturn coincides with a 12th consecutive month of declining job vacancies.

According to a recent jobs survey conducted by KPMG and the Recruitment and Employment Confederation (REC), the number of individuals seeking employment has risen for the 20th month in a row as of October.

The survey reveals that the permanent placement index has decreased to 44.1, and the temporary billings index has dropped to 47.2. Readings below 50 reflect a contraction in hiring activity.

Polling 400 recruitment and employment agencies, the survey highlighted a nationwide decline in permanent hiring, with London experiencing the least contraction. In contrast, the South of England, including the capital, noted the steepest decrease in temporary hiring. Particularly, the demand for skilled personnel in the IT and computing sectors has been notably weak.

Jon Holt, the CEO of KPMG UK, commented, “The uncertainty surrounding the autumn budget caused businesses to pause their hiring strategies throughout October, resulting in the most significant slowdown in permanent staff appointments since March. Employers have also refrained from relying on temporary staff, as this segment has faced its largest decline in seven months.”

The government has announced a £40 billion tax increase in the budget, with approximately £25 billion expected from hikes in employers’ national insurance contributions. Holt predicts that these additional tax burdens could “dampen hiring further” as companies seek to cut costs.

During the period known as the pandemic’s “great resignation,” when hiring was robust, many companies were offering substantial salary increases to attract and retain employees.

In contrast, the current job market has slowed significantly, with an increasing number of job seekers competing for fewer openings. Permanent salary growth fell again in October, reaching its lowest point since 2021. While temporary pay rates saw a slight improvement compared to September, the growth rate remains modest and well below historical trends.

Nonetheless, some employers indicated a willingness to raise starting salaries for high-caliber candidates.

Neil Carberry, CEO of REC, stated that the current pay trends do not provide sufficient evidence for the Bank of England to consider reducing interest rates further.