UK Hiring Tumbles by Most in Nearly Two Years, KPMG Survey Shows

UK business hiring experienced its sharpest decline in nearly two years in June, with permanent staff appointments falling significantly and available workers increasing, according to a survey by KPMG and the Recruitment and Employment Confederation. This notable weakening in the labor market is attributed to the sustained fallout from payroll tax hikes, indicating their persistent impact on corporate hiring decisions.

Analysis

The UK labor market showed a significant deterioration in June, with permanent staff appointments falling at the fastest pace in 22 months, according to the KPMG and Recruitment and Employment Confederation survey. This sharp decline in corporate hiring coincided with a notable jump in the number of available workers, signaling a distinct loosening of labor market conditions. The report explicitly links this downturn to the persistent fallout from a recent hike in payroll taxes, indicating that the fiscal policy change is having a material and ongoing dampening effect on business confidence and staffing decisions. The data points to a cooling UK economy where demand for labor is contracting, a key leading indicator for broader economic activity.

Key Decisions for Investors

• Investors should re-evaluate exposure to UK domestic-focused cyclical sectors, as the sharp decline in hiring signals a potential slowdown in consumer and business activity.
• The evidence of a loosening labor market may reduce pressure on the Bank of England for aggressive monetary tightening, a development that could impact strategies in UK government bonds and interest-rate sensitive assets.
• Given the direct link to fiscal policy, it is critical to monitor for any further changes or government responses to the economic impact of the payroll tax, as this will be a key driver of future labor market trends.