Private sector hiring is falling at one of the fastest rates since the global financial crisis, with recruitment activity weakening further in July amid reduced vacancies, tighter budgets and ongoing caution from employers.
According to the latest Report on Jobs from KPMG and the Recruitment and Employment Confederation (REC), the number of people placed into permanent roles fell for the seventeenth consecutive month. The pace of decline remains sharp, with July’s index for permanent placements registering just 40.0. That’s far below the neutral 50.0 mark that separates growth from contraction.
The downturn is being attributed to a lack of available roles rather than candidate interest. The report also found that temporary hiring was subdued, dropping for the sixth month running.
Neil Carberry, chief executive of the REC, said the latest data “underlines how uncertain the economy remains”, and warned that businesses are continuing to delay hiring decisions until there is more clarity.
Vacancies drop as employer caution deepens
While the slowdown in hiring began in early 2024, the latest figures confirm that the trend has not yet reversed. July’s overall vacancies index stood at 43.2, the second-lowest since mid-2020. This includes a drop in demand for both permanent and temporary staff, with permanent vacancies falling to an index of 43.0.
In an accompanying statement, Carberry said the public and private sectors are both holding back, and warned that delays to government spending are having an impact.
“The economy is growing, but businesses are still uncertain, especially about the longer-term path for interest rates,” he said. “It’s critical that government departments now release spending that is planned for the remainder of the financial year. Across the UK, recruiters are looking for growth in order books in both the private and public sectors.”
Claire Warnes, a partner at KPMG UK, said that while the continued fall in permanent hiring is troubling, there was a silver lining in the increase in candidate availability.
“We continue to see evidence of salary growth stabilising and more people available for work,” she said. “This is good news for businesses that have struggled to find staff in recent years, but employers need to remain focused on engaging and retaining talent as competition will remain in key sectors.”
More candidates chasing fewer jobs
Candidate availability rose again in July, reflecting a mix of redundancies, weaker hiring and increased job-seeking. The staff availability index for permanent roles was 64.9, one of the highest in recent years, indicating a strong rise in the number of people actively looking for work.
This is a marked contrast to the post-pandemic labour market, when employers frequently cited talent shortages as a barrier to growth. Temporary staff availability also rose significantly, reaching 61.3 on the index.
But despite this improvement in supply, pay growth is cooling. The rate of starting salary increases for permanent roles slowed for the fifth consecutive month, and July’s index fell to 52.0, the lowest since December 2023.
Temporary pay rates also showed weaker growth, falling to 51.1, which is a notable drop from 54.4 in May. The figures suggest employers are reining in pay offers amid cost pressures and weak productivity growth.
Regional and sectoral breakdown
The slowdown in hiring was broad-based, with all English regions reporting a drop in permanent placements. London recorded the sharpest decline, while the Midlands and the North of England also saw marked falls.
Among sectors, IT and hospitality posted the steepest decline in permanent staff demand. Only nursing, medical and care continued to see modest growth in hiring, suggesting that workforce needs remain acute in frontline services.
Temporary hiring showed more resilience in sectors such as blue-collar work and healthcare, but the trend remains negative overall.
Broader signs of labour market stress
The latest hiring slump follows a string of warnings from business groups and economists about rising employment costs and policy uncertainty.
In a separate report, the Chartered Institute of Personnel and Development said private sector hiring intentions were at their lowest since the pandemic, as national insurance increases and regulatory changes deterred firms from expanding their workforces. Sectors that rely heavily on young workers, such as hospitality and care, were among the most affected.
Recruiters are urging policymakers to provide clearer economic signals and unlock stalled public spending. They also want a more stable policy environment, particularly in light of upcoming changes in employment law and immigration rules.
Carberry warned that if the government delays action, the economic cost could be severe.
“Lower hiring means slower growth, particularly in sectors that depend on people to scale up. We need policy stability, strategic investment and a plan for growth that includes jobs,” he said.
The full KPMG and REC Report on Jobs is based on survey data collected from around 400 UK recruitment and employment consultancies. The monthly report, compiled by S&P Global, is considered a bellwether for labour market trends.
