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UK employers pause permanent hiring as economic worries continue

Skyscrapers in the Financial centre of Canary Wharf in London, Great Britain

Major UK recruiters have warned the Bank of England of a slump in demand for permanent hiring.

It marks the second-highest drop since the initial economic collapse triggered by the first Covid-19 lockdown in June 2020.

The Recruitment and Employment Confederation (REC) trade body said persisting economic uncertainty and a reluctance to commit to new hires had dampened activity in November.

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It led to the swiftest increase in the availability of new job candidates since December 2020. 

The Bank of England, led by Governor Andrew Bailey, closely monitors the UK job market for signs of inflation persistence.

It follows a pause in the sequence of 14 consecutive interest rate increases in September. 

With the economy grappling with elevated borrowing costs, the central bank would maintain interest rates at the current level of 5.25 percent.

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Bailey has said rates must remain high for a prolonged period to combat lingering inflation.

The REC and KPMG figures suggest limited indications the job market will significantly contribute to future inflation.

Recent data reveals a decline in starting salary inflation to a 32-month low, while job vacancies dropped for the second time in three months. 

"Businesses will need to stay resilient to manage this period of flux"

Claire Warnes, skills and productivity partner at KPMG UK, said employers were halting hiring and implementing redundancies due to a "sustained economic slowdown." 

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She said: “Businesses want to plan for the year ahead, but the prospect of faltering UK economic growth means the certainty they need isn’t there. 

“This is now impacting starting salaries, as pay inflation isn’t as sharp as in previous months. 

“With the Bank of England looking like it will be keeping interest rates high for now, businesses will need to stay resilient to manage this period of flux.”

The REC and KPMG survey shows employer confidence waned amid the current economic climate.

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It results in hiring freezes and decreased vacancies, with London experiencing the sharpest drops. 

Neil Carberry, Chief Executive of the REC, said 2023 has been a “testing year” for recruiters but suggests that employers might defer hiring plans until the new year. 

He also expects a potential strengthening of wage growth in the coming year.

He said: “For policymakers any return to growth will put strain on a labour market with embedded shortages – this week’s pro-election rather than pro-economy decision on immigration will exacerbate that.”

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