Demand for UK Workers Crashes in Budget Aftermath, REC Survey Shows

The UK's labour market has experienced a significant downturn following the new Labour government's first budget, with demand for workers plummeting to its lowest level since August 2020, according to a survey by the Recruitment and Employment Confederation (REC). The REC's index of demand for staff slid to 43.9 in November, down from 46.1 in October, indicating a sharp decline in hiring intentions across the country.

The collapse in hiring activity can be attributed to the tax increases on employers, particularly the rise in National Insurance Contributions (NICs), which have led firms to reassess their staffing needs and put a pause on recruitment activity. The KPMG-REC Report on Jobs also indicated that vacancies declined at the fastest pace since August 2020, with an especially severe drop in demand for permanent workers. This suggests that businesses are taking a more cautious approach to hiring due to the increased costs and uncertainty surrounding the budget.

The uncertainty around the Employment Rights Bill has likely contributed to the decline in demand for workers in the UK. The REC survey showed that the index of demand for staff slid to 43.9, the lowest reading since August 2020. This decline follows the new Labour government's first budget, which included tax increases on employers. The REC's chief executive, Neil Carberry, issued an "urgent warning" over the Employment Rights Bill, describing it as "undercooked". Employers have expressed concerns about the bill's potential impact on their costs and flexibility, which may have led them to reassess their hiring needs and put a pause on recruitment activity. This uncertainty, combined with the tax increases, has likely contributed to the sharp decline in demand for workers.

The recent advances in AI and technology in the workplace have significantly impacted the demand for workers, particularly in terms of automation and remote work. According to the REC survey, the index of demand for staff slid to 43.9 in November, the lowest reading since August 2020, following the new Labour government's first budget. This decline was driven by employers reassessing their hiring needs and putting a pause on recruitment activity, as they considered the impact of the budget on business performance. The adoption of AI and new technology in the workplace is necessary, but it is all too often implemented without involving workers in how it is deployed, or what it is being deployed for. As a consequence, workers can end up feeling anxious when surveillance AI is increasingly used for setting targets and monitoring their performance. The recent advances in AI technology, most notably the creation of ChatGPT, present challenges for regulating responsible use of AI and technology in the workplace.

The gig economy and atypical forms of working have significantly impacted the demand for workers in the UK. According to the REC survey, the index of demand for staff slid to 43.9 in November 2024, the lowest reading since August 2020, following the new Labour government's first budget. This decline was driven by firms reassessing their hiring needs and pausing recruitment activity due to the budget's impact on business performance. The gig economy's growth and the increasing adoption of technology have accelerated the shift towards more flexible and remote working opportunities, further influencing the labour market dynamics. As the gig economy continues to grow and technology advances, the demand for workers may evolve, with a greater emphasis on skills development and reskilling to meet the changing needs of the labour market and economy.

In conclusion, the UK's labour market has experienced a significant downturn following the new Labour government's first budget, with demand for workers plummeting to its lowest level since August 2020. The decline in hiring activity can be attributed to the tax increases on employers and the uncertainty surrounding the Employment Rights Bill. The recent advances in AI and technology in the workplace, as well as the growth of the gig economy, have also contributed to the changing dynamics of the labour market. As the UK navigates these challenges, it is crucial for the government to address the concerns of employers and workers alike, ensuring that the labour market remains resilient and adaptable in the face of economic uncertainty.