The Recruitment & Employment Confederation’s (REC) latest JobsOutlook shows building momentum – including notable strength in London, the bellwether of the UK labour market.

Employers’ confidence on the path of the UK economy remains weak, but has steadily recovered through 2024, while firms themselves have been getting more confident in their own investment and hiring decisions. The positive sentiment in October is a promising signal of a potential shift in the labour market. But the big question now is whether the large payroll tax raid in the Budget takes the steam out of this trend.

Neil Carberry, REC Chief Executive, said:

“The strong growth in employer confidence about hiring and investing in their own firms slowed a little as firms awaited a Budget they knew would be tough. The scale of the changes to Employers National Insurance – in particular, the decision to increase the tax far more for lower earners – will be a headwind for hiring confidence from here on in. But the economy and the labour market are subject to far greater trends than government action, and the gentle recovery of employer views on the wider economy will be what ultimately drives demand in 2025. London appears to be leading the way on this.

“The big question now is not if firms will restructure their hiring plans post-Budget, but whether wider economic growth will make this an annoyance in a growing wider economy, or a headwind that firms struggle with in a tough economy. The Chancellor has balanced the books on the backs of businesses across the country, now she needs to deliver on support for growth. A key part of this will be ensuring further costs are not layered onto employers unnecessarily. Making sure the Employment Rights Bill maintains and enhances our flexible, diverse labour market – rather than loading firms with more costly process that does not help workers – is a key test.

“Confidence trends this year suggest the labour market will remain resilient, despite ongoing economic challenges in 2025. Businesses are adapting, embracing new ways of working and determined to succeed. They can boost their ability to compete in the labour market by engaging with specialist recruitment and talent businesses, who can also help jobseekers with more up-to-date advice and guidance.”

Employers’ confidence in making investment and hiring decisions fell by six percentage points this quarter (to net: +2) – down from the notable near-term peak of net: +16 in the three months to June 2024. But the quarterly fall was driven by a sharp decline in confidence in August (to net: -7), after which it recovered strongly through to net: +9 by October. The +2 still shows employers getting more confident across the quarter.

The survey found that employers’ confidence in the UK economy performance improved by one point (net: -25) when compared to the three months to August. Looking at month to month, crucially sentiments improved in October (net: -17), compared to September (net: -32). While this trend is still negative, it has been improving across the year.

Short-term permanent hiring intentions remained positive but fell three percentage points this quarter (compared to the three months to August), to net: +11. But London remained a notable positive outlier, improving from net: +20 to net: +27 between the two periods. Medium-term permanent hiring intent was very similar to short-term sentiment in this period, witnessing just a small decline of two points. Yet in London sentiment improved from net: +23 to net: +25 between the two periods.

There was an unusual amount of uncertainty among employers about their forecast use of temporary labour. More than four in ten employers (45%) unable to state their short-term plans for agency worker hiring.  Moreover, the uncertainty intensified across the period, reaching two-thirds (67%) who could not articulate their plans in October. And the absence of plans was heightened across the quarter in two cohorts: employers in the North (reported by 73%) and mid-sized (50-249 employee) enterprises (77%). Similarly, in the medium-term outlook for agency worker hiring, half of the UK’s employers (51%) who utilise agency workers were unsure. The uncertainty among employers about temp hiring likely reflects that the survey was undertaken ahead of one of the most eagerly anticipated Budgets for years making firms uncertain of their next hiring moves until they heard what the Chancellor had to say for sure. There is also the broader context of economic volatility, changing labour market conditions and evolving business needs.

Stay up to date

Keep me up to date to receive all the latest news and updates.