UK Employment Market Hits Thirteen Year Low as Business Confidence Weakens

British employers’ hiring confidence has plummeted to its lowest level in 13 years, despite indications of a summer uptick in economic output. The BDO Business Trends barometer reveals this significant downturn, primarily attributed to the April increase in employers’ national insurance and mounting cost pressures.

The comprehensive survey, polling 4,000 companies, demonstrates that UK businesses are exhibiting ‘prolonged caution’ in their approach to recruitment. The national insurance rise, implementing a £20 billion annual increase to employers’ costs, has substantially impacted hiring decisions across sectors.

Business sentiment experienced a decline in June compared to May, with BDO characterising the overall confidence levels as ‘underwhelming’. The looming possibility of additional tax increases in the autumn budget has further dampened business optimism, a situation potentially exacerbated by the government’s recent reversal on welfare cuts.

The services sector provided a modest bright spot, benefiting from enhanced consumer spending and favourable June weather conditions. Notable events in the hospitality calendar, including Royal Ascot, saw increased demand. However, Scott Knight, BDO’s head of growth, cautioned against over-reliance on weather-dependent economic boosts.

Financial services have been particularly hard hit, with a CBI survey revealing a sharp decline in optimism among sector leaders. The percentage balance of respondents reporting reduced headcount worsened from plus 2 per cent in March to minus 7 per cent in June, with September expectations plummeting to minus 52 per cent.

Banking sector concerns have intensified amid speculation about potential tax increases. The industry currently contributes £4.2 billion annually through two separate levies – a bank profits surcharge and a bank levy on liabilities. A leaked memo from Angela Rayner suggesting possible levy increases has heightened anxiety within the sector, potentially contradicting Rachel Reeves’s growth-focused economic strategy.