The UK labor market ended 2025 in a state of pronounced caution, with businesses scaling back hiring amid economic uncertainty and rising costs, according to the latest KPMG and Recruitment & Employment Confederation (REC) UK Report on Jobs. The survey, compiled by S&P Global, found that permanent staff appointments declined at the sharpest rate in four months, extending a 39-month downturn. Temporary billings also fell for the second month in a row.
The data, collected between December 4 and 17, 2025, underscores a broad weakening in labor demand. Permanent vacancies dropped more sharply than temporary ones, with the overall decline in job vacancies accelerating slightly from November. The steepest falls in permanent roles were seen in Secretarial/Clerical and IT & Computing sectors, while Engineering saw the softest drop. For temporary positions, vacancies decreased in nine out of ten monitored sectors.
Conversely, candidate availability surged substantially due to widespread redundancies. The supply of permanent workers grew at its fastest pace in four months. This imbalance of rising supply and falling demand led to only tentative improvements in pay. Starting salaries for permanent staff rose to a seven-month high, though remained below long-term averages.
Regionally, the Midlands showed isolated resilience with a slight increase in permanent placements—the first since May—and sharp growth in temporary billings. In contrast, London, the North, and South of England saw steep declines.
Jon Holt, Group Chief Executive and UK Senior Partner at KPMG, attributed the slowdown to prolonged cost pressures and global economic volatility. “Many firms continue to pause hiring and are flexing where they can by using temporary staff,” Holt noted, adding that executives are prioritizing technology investments but await stronger economic signals before ramping up recruitment.
Separate analysis points to the broader economic context dampening hopes for a quick recovery. Following Chancellor Rachel Reeves's November budget announcement, which revealed an extra £26 billion ($34.9 billion) in tax revenue, household spending and the job market deteriorated sharply. Barclays Plc reported card spending fell 1.7% year-over-year in December 2025, with consumers cutting back on non-essentials like clothing and dining out.
Business confidence has also been hit, with an index from the Institute of Chartered Accountants in England and Wales falling to a three-year low in Q4 2025. Data showed businesses announced intentions to cut 33,392 jobs in the four weeks to December 14, the highest figure since early 2023.
Analysts suggest the UK's stagnant economic growth—with a predicted slight 0.1% expansion in November—hinges on a stronger labor market and a recovery in consumer confidence. Andrew Wishart, a UK economist at Berenberg, stated, “Right now, it looks soft because we’re seeing weakness in the job market affecting spending.” The overall outlook suggests hiring will remain subdued in early 2026, with temporary roles providing flexibility until sustained economic growth returns.
