Confidence among UK employers in hiring and investment has shown signs of recovery, according to the Recruitment & Employment Confederation’s (REC) latest JobsOutlook.
Conducted between August and October 2024, the survey captures responses from 504 UK employers, highlighting gradual improvements in perceptions of the economy and labour market resilience.
Despite enduring economic challenges, employer sentiment towards their own hiring and investment decisions improved steadily throughout 2024. This trend offers a cautiously optimistic outlook for 2025, particularly with London emerging as a strong performer in labour market activity. However, the Chancellor’s recent payroll tax hike has raised concerns about whether this momentum can be sustained.
Neil Carberry, Chief Executive of the REC, noted the growing confidence but warned of potential setbacks following the Budget: “The scale of changes to Employers’ National Insurance will be a headwind for hiring confidence. The labour market’s resilience will depend on whether the wider economy grows sufficiently to absorb these changes or whether firms struggle in a tougher economic environment.”
Confidence Trends and Regional Insights
The survey revealed a mixed picture regarding employer confidence in investment and hiring. Although the net confidence score dropped six points this quarter to +2, this figure masks a recovery from a sharp dip in August (net: -7) to a more positive net: +9 by October. This progression highlights a growing willingness among firms to consider investment despite ongoing challenges.
Employers’ outlook on the UK economy remains subdued, but there has been improvement. Confidence in economic performance rose by one point (net: -25) compared to the preceding quarter. Monthly figures also show an upward trajectory, with October sentiment (net: -17) improving significantly from September (net: -32).
London stood out as a positive outlier, with short-term permanent hiring intentions rising from net: +20 to net: +27. Medium-term hiring sentiments also improved in London, moving from net: +23 to net: +25. These figures underscore London’s role as a bellwether for the UK labour market, reflecting its adaptability and economic strength amidst broader uncertainties.
Temporary Labour and Employer Uncertainty
One notable finding from the survey is the high level of uncertainty surrounding the use of temporary labour. In October, 67% of employers could not articulate short-term plans for agency worker hiring, a significant rise from earlier in the quarter. This uncertainty was particularly pronounced among employers in the North (73%) and mid-sized enterprises (77%).
The lack of clarity around temporary hiring likely reflects the timing of the survey, conducted ahead of the Budget announcement. Firms may have been hesitant to commit to hiring strategies without understanding the full implications of government policy changes. Broader economic volatility and evolving business needs also contribute to this uncertainty.
The payroll tax increase announced in the Budget has introduced further challenges for businesses, particularly those with lower-earning employees. Despite these changes, Carberry stressed the importance of maintaining a flexible and diverse labour market to support economic growth. He highlighted the need for government policies, such as the Employment Rights Bill, to avoid placing additional burdens on employers without delivering tangible benefits to workers.
“Businesses are adapting and embracing new ways of working,” Carberry said. “Engaging with specialist recruitment and talent businesses can help firms compete effectively in the labour market while offering jobseekers up-to-date advice and guidance.”
While challenges remain, including economic headwinds and changes to employer costs, the gradual recovery in employer confidence suggests the labour market is poised to remain resilient in 2025. Firms are increasingly focused on adapting to new circumstances, leveraging innovation, and seeking opportunities to strengthen their workforce.
