What's happened
UK employment declined by 0.9% in December 2024, following tax hikes announced in October. Recent data shows a rebound in July, but annual growth remains weak. Firms are cautious, with many employees prioritising job security over ambition amid economic uncertainty.
What's behind the headline?
The UK’s employment landscape is at a crossroads. Recent data confirms a slowdown in job growth, with a 0.9% decline in December and a cautious outlook for the coming year. The rise in 'job hugging'—where employees cling to current roles—signals widespread insecurity. This trend is driven by fears of further tax hikes and economic instability.
The recent rebound in employment in July suggests some resilience, but the overall pace remains sluggish. Firms are responding to increased operating costs and policy uncertainty by freezing hiring or reducing staff, as evidenced by surveys from the Bank of England and HR platforms. The Bank’s survey indicates a 0.5% employment reduction over three months, the largest since 2021, with expectations of further cuts.
The government’s tax policies, notably the increase in employer national insurance contributions, are central to this slowdown. Business leaders warn that further tax hikes could exacerbate employment declines and dampen economic growth. Meanwhile, the Bank of England faces a dilemma: maintaining interest rates to curb inflation or easing to support employment. The current data suggests that the economy is fragile, and policymakers will likely keep rates steady to avoid further job losses.
This environment underscores a broader challenge: balancing inflation control with employment stability. The coming autumn budget will be pivotal, as the government seeks to reassure markets and businesses while addressing fiscal shortfalls. For workers, the trend indicates a cautious job market, with many prioritising security over ambition, especially among younger employees.
In sum, the UK’s employment outlook remains uncertain, with policy decisions and global economic factors likely to shape the trajectory in the months ahead. The risk of further job cuts persists unless fiscal and monetary policies are carefully calibrated to support growth and stability.
What the papers say
The Guardian reports that UK firms cut jobs at the fastest pace in four years, with employment declining by 0.5% over the summer, driven by tax hikes and rising costs. The Bank of England’s survey echoes this, showing a 0.5% reduction over three months and pessimism about future employment. Meanwhile, Bloomberg highlights that firms expect only a 0.2% increase in employment over the next year, indicating a cautious outlook.
Contrastingly, The Independent notes that despite these declines, a significant majority of businesses (62%) plan to hire in the next 12 months, suggesting some optimism. However, the overall tone across sources points to a fragile recovery, with economic uncertainty and policy impacts weighing heavily on employment prospects.
How we got here
The UK’s jobs market has been affected by tax increases announced in the October 2024 budget, including higher national insurance contributions. These policies have led to a slowdown in employment growth, with firms cautious about hiring amid inflation and global trade tensions. Data from various surveys indicate rising employee job-hugging and reduced employment intentions, reflecting economic uncertainty and cost pressures.
Go deeper
- How are workers reacting to the job market conditions?
- What impact will upcoming tax policies have on employment?
- Are there sectors more affected than others?
Common question
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Why Are UK Firms Cutting Jobs Now?
Recent reports show UK companies are reducing employment at the fastest rate in four years. This trend raises questions about what's driving these job cuts, how economic policies like tax hikes are impacting employment, and what it means for workers and job seekers. Below, we explore the key factors behind these changes and what the future might hold for the UK economy.
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Why Are UK Companies Cutting Jobs Now?
Many people are asking why UK businesses are reducing their workforce at this moment. Recent reports show a significant decline in employment, driven by rising costs and tax increases. If you're wondering what this means for the UK economy and your job prospects, read on to find clear answers to your most pressing questions.
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Why Is UK Employment Slowing Down?
The UK job market has experienced a slowdown recently, with employment declining amid rising costs and policy changes. Many are wondering what’s causing this trend and what it means for the economy. Below, we explore the key factors behind the slowdown, how tax changes impact job growth, and what industries are most affected. If you're concerned about the future of UK employment, these FAQs will help clarify the current situation and what to expect next.
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