The UK labour market continued its downward trend in January 2025 with permanent placements down and temp billings falling to the greatest degree in over four-and-a-half years, according to the latest Report on Jobs by the Recruitment and Employment Confederation and KPMG, compiled by S&P Global.

January’s data showed a further steep drop in permanent placements as falling demand for workers and a general air of business uncertainty weighed on the UK labour market. Extending the current period of contraction to 28 months, January’s survey showed that permanent placements declined at a pace little changed on December’s 16-month record.

There were again reports of a reluctance to hire staff given upcoming changes to the cost of employing staff.

By far the steepest reduction in permanent placements was seen in the North of England. Rates of contraction nonetheless remained sharp across all three other monitored regions.

For temp billings, apart from the Midlands, where a fractional increase was recorded, all English regions registered drops in temp billings led by the South of England and London.

“Businesses continue to hold back on recruitment, leading to permanent and temporary placements falling steeply again in January,” Jon Holt, group chief executive and UK senior partner KPMG, said in a press release.

Demand for staff continued to decline noticeably during January, overall falling to the greatest degree since August 2020.

Vacancy numbers fell especially sharply for permanent workers, with the rate of contraction accelerating for the fifth successive month to a near four-and-a-half-year peak. That said, temp workers also fell at a steeper pace (the sharpest recorded by the survey since June 2020).

Amid widespread reports of a growing volume of redundancies at firms in January, linked in turn to challenging market conditions for businesses, both permanent and temporary staff availability increased. However, the overall rate of growth softened since December to their slowest in just under a year.

In January, permanent staff vacancies declined across all the categories covered by the survey. Executive/professional recorded the steepest contraction again, followed by secretarial/clerical.

All sub-sectors recorded a decline in temp vacancies during January. Rates of contraction were also generally steeper, with the sharpest reduction seen for executive/professional.

“While firms are still willing to pay for top talent, increased staff availability weighed on pay growth. This cooling may have encouraged the Bank of England’s decision to cut rates last week,” Holt said. “It is unlikely that we will see any significant improvements in the survey data over the near term, as hiring stays muted and staff availability continues to rise. Yet business leaders are ready for growth signals and gradual rate cuts could start to translate into greater confidence to plan and invest.”

Meanwhile, permanent salary growth softened during January, easing to a modest level that remained amongst the slowest in the current sequence of inflation (that began in March 2021) and was well below the historical trend.

Although firms were again willing to pay higher starting salaries for good quality candidates, an increased availability of staff tended to weigh on pay growth. Temp rates rose to an even slower degree, with inflation marginal and the weakest in the current four-month growth sequence.

“Businesses entered the year uncertain on the growth path, and that has driven a ‘wait and see’ approach to hiring,” Neil Carberry, REC chief executive, said. “Around the country, REC members report that clients have plans and are hopeful for the year ahead - but firms are slowing investment until they see more momentum in the economy.”

Carberry added that last week’s move on interest rates was timely as a way of boosting confidence.

“Businesses entered the year uncertain on the growth path, and that has driven a “wait and see” approach to hiring,” he said. “Around the country, REC members report that clients have plans and are hopeful for the year ahead - but firms are slowing investment until they see more momentum in the economy.”