UK employers report weaker hiring but stronger pay growth in December
Britain’s jobs market cooled in December but starting salaries for permanent jobs rose at a faster pace, according to a survey of recruiters that will be studied by the Bank of England as it considers when it should cut interest rates again.
The monthly survey by the Recruitment and Employment Confederation trade body and accountants KPMG – which was published on Monday – showed hiring in December fell for the 39th month in a row and at the steepest pace in four months.
Employers have said the increase in a payroll tax ordered by finance minister Rachel Reeves in her 2024 budget has contributed to their wariness about hiring.
The REC survey showed average starting salaries for permanent workers rose by the most since May as firms competed for candidates with in-demand skills but the pace of pay growth was below its long-run average.
“The jobs market at the end of 2025 was still signalling caution. After a long stretch of rising costs pressures and higher global economic uncertainty, many firms continue to pause hiring and are flexing where they can by using temporary staff,” Jon Holt, chief executive and UK senior partner at KPMG, said.
REC Chief Executive Neil Carberry said December’s fall in placements might prove a blip after an improvement in the second half of 2025.
REC and KPMG also said:
- The survey’s permanent staff placements gauge fell to 44.3, the lowest since August and down from 45.5 in November;
- Temporary staff hiring fell to 47.6 from 48.8, partly due to weak business confidence and concerns about costs;
- The availability of candidates for permanent roles edged up while vacancies fell;
- The BoE reduced interest rates by a quarter-point to 3.75% in December and its policymakers are split between those worried about inflation pressures and others focused on a downturn in the labour market;
- Investors see one or two more 25 basis-point cuts in 2026.