Britain is grappling with a “hiring recession” following a record £25bn tax increase on National Insurance contributions (NIC) introduced by Chancellor Rachel Reeves, according to leading recruitment experts.
Michael Stull of ManpowerGroup described November as a turning point, with hiring grinding to a halt as employers faced mounting costs.
“The numbers mirror a recessionary period, even if we’re not officially in one,” he said, adding that part-time and low-paid jobs are bearing the brunt of the NIC hike.
JC Townend of Adecco, the world’s second-largest staffing company, echoed concerns, stating that early indications suggest businesses are reassessing workforce needs to offset rising costs. “This could significantly impact hiring decisions moving forward,” she warned.
Budget Sparks Economic Slowdown
The labour market had already started to cool ahead of Ms Reeves’s Budget in October, which further dampened hiring.
Business surveys reveal a sharp economic slowdown, with the Confederation of British Industry (CBI) forecasting a drop in private sector activity during the first quarter of next year.
The Bank of England has also downgraded growth expectations, predicting zero growth for the year and raising fears of an official recession—defined as two consecutive quarters of economic contraction.
Michael Stull painted a grim outlook for the job market: “I don’t foresee a significant rebound anytime soon. The uncertainty is unprecedented, and recovery will likely be a slow process.”
Workers’ Rights Reforms Could Exacerbate Challenges
Angela Rayner’s proposed reforms to workers’ rights are also sparking concerns. Townend warned these changes could have “far-reaching consequences” for sectors like retail and hospitality, which rely on temporary workers to meet seasonal demand.
“Flexible work arrangements benefit both employers and employees, particularly during peak seasons,” she explained. “But mandatory hour guarantees could dissuade employers from hiring altogether, hitting lower earners such as students and caregivers the hardest.”
Stull added that young people and caregivers could face fewer opportunities due to increased hiring risks.
“The reforms could worsen the existing worklessness crisis, which has already seen 700,000 working-age adults leave the labour market due to ill health since 2020.”
Automation and Offshoring on the Rise
The CBI has reported the weakest economic outlook in over two years, while a Bank of England survey noted that businesses are responding to challenges with reduced headcount, hours, and pay. Some firms are accelerating automation investments or offshoring labour to cut costs.
Government Defends Budget
A government spokesperson defended the measures, highlighting efforts to support employers.
“More than half of businesses will see no change or a reduction in their NIC bills, with lower-paid employees benefiting the most,” they stated. The government also emphasised the Office for Budget Responsibility’s (OBR) forecast of falling unemployment.
Despite these assurances, recruiters warn that the current trajectory signals prolonged challenges for Britain’s workforce and economy.
