UK hiring slowdown eases as starting pay rises

The UK’s prolonged hiring slowdown showed tentative signs of easing in January, with recruitment activity stabilising slightly and starting pay for new staff rising at a faster pace, according to the latest survey from the Recruitment and Employment Confederation and KPMG.

Data from the monthly Report on Jobs indicated that the decline in permanent staff placements softened to its weakest pace since mid-2024. While hiring volumes remain in contraction, recruiters reported improving confidence at the margin following several months of subdued demand.

The index measuring permanent placements rose to 46.9 in January, up from 44.3 in December, remaining below the 50 threshold that signals growth. Temporary staff billings moved into marginal expansion, suggesting businesses are cautiously increasing headcount through short-term roles rather than committing to permanent hires.

Starting salaries for permanent staff increased at the fastest rate since August, driven by skills shortages in certain sectors and continued competition for experienced candidates. Recruiters reported that pay pressures were most evident in technical, professional, and specialist roles, despite the broader slowdown in hiring.

Neil Carberry, chief executive of the Recruitment and Employment Confederation, said employers appeared to be emerging from a prolonged period of hesitation. “After a long wait-and-see phase, there are early signs that confidence is beginning to return,” he said, while cautioning that conditions remain fragile.

KPMG’s head of advisory, Lisa Fernihough, said clearer economic signals were encouraging companies to revisit delayed hiring plans. She noted that businesses were still closely managing costs, but were more willing to proceed with recruitment where growth or operational resilience depended on it.

The report also showed vacancies continuing to fall, extending a decline that has now lasted more than two years. Candidate availability increased modestly, reflecting layoffs in some sectors and reduced hiring elsewhere, although recruiters said labour supply remained tighter than in previous downturns.

The latest survey adds nuance to a mixed picture for the UK labour market. Other indicators suggest unemployment is set to rise further this year, with employers facing higher wage bills, increased payroll taxes, and ongoing uncertainty around demand. At the same time, persistent pay growth for new starters complicates the outlook for inflation.

Labour market trends remain central to interest rate decisions by the Bank of England, as policymakers assess whether easing employment conditions will translate into lower wage pressures. The central bank has previously signalled that sustained cooling in the jobs market would support a gradual reduction in borrowing costs.

January’s figures suggest the UK labour market is no longer deteriorating as sharply as it did late last year, but recruitment activity remains subdued. Any sustained recovery is likely to depend on stronger economic growth and clearer signals on costs and demand in the months ahead.