(Bloomberg) -- Hiring at UK businesses fell at steepest pace since March as employers paused recruitment in anticipation of tax rises in Labour’s budget, according to a survey closely watched by the Bank of England.
The report by the Recruitment & Employment Confederation and KPMG also found that wages for permanent jobs cooled further in October, rising at their slowest pace since 2021, while vacancies declined.
“Uncertainty over the Autumn Budget saw businesses continue to put hiring plans on hold during October,” said Jon Holt, chief executive at KPMG UK. “With many of the tax rises announced in last week’s Budget impacting businesses, the expectation from some chief execs is that this could further dampen hiring as companies grapple with absorbing any extra costs.”
Businesses are set to bear the brunt of Chancellor Rachel Reeves’ decision to raise taxes by £40 billion ($51.9 billion) a year to help fund investment and fix public services. Employers are expected to respond to higher payroll levies, together with a hefty increase in the minimum wage, by slowing hiring and restricting pay increases to protect their profit margins.
The BOE is monitoring labor market developments for signs of lingering inflation as it assesses the timing of future interest-rate cuts. Policymakers lowered borrowing costs for the second time this year on Thursday but signaled a “gradual” approach to further easing.
“There is little in the pay data in today’s report that suggests the Bank of England should step away from further cuts to interest rates, which will also boost business confidence,” said Neil Carberry, chief executive at REC.
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