The UK’s labour market continued to weaken midway through the first quarter of 2025 amid reports that businesses paused or pared back hiring plans due to the weaker economic outlook and rising payroll costs, according to the latest Report on Jobs released by the Recruitment and Employment Confederation and KPMG.

February’s data showed a decline in both permanent placements and temp billings, albeit at a slower pace compared with January. Permanent staff appointments fell for the 29th month in a row, but it was the softest drop since last October, the report said.

The downturn in temp billings also eased from January’s 55-month record and remained solid overall, it added.

Weaker demand for workers was also highlighted by a further drop in overall vacancies in February. The availability of staff also rose, with recruiters saying that redundancies had expanded the pool of available workers.

Compiled by S&P Global, the report is based on responses to questionnaires sent to a panel of 400 recruitment and employment consultancies.

“After a long winter, there are some hints of a turn in the labour market as we head into spring,” Neil Carberry, CEO of the REC, said in a press release.

“This is led by the private sector, despite recent tax rises, and that shouldn’t be missed. Enabling companies to grow is at the heart of our prosperity — the chancellor must use the Spring Statement to build their confidence in growth.”

Chancellor Rachel Reeves will present her Spring Statement on 26 March, when further tax changes could be announced.

ONS data shows that there were 819,000 vacancies across the UK in the three months to January — 110,000 fewer than the same period a year ago.

Meanwhile, the slowdown in staff demand and improved candidate numbers kept a lid on overall pay pressures. However, starting salaries slowed for a second straight month in February and rose at their weakest pace in four years.

London and the Midlands registered higher permanent pay, while salaries were broadly unchanged in the South of England and fell in the North of England, the report said.

According to data published by the Office for National Statistics, average weekly earnings increased by 6.0% on an annual basis over the final quarter of 2024. This was up from 5.5% in the preceding survey period and marked the highest rate of growth for just over a year.

<HEADING 5>Across the Regions

Demand for permanent workers in the secretarial/clerical, executive/professional and retail sectors recorded the steepest reductions in February. The quickest drop in demand for temporary staff occurred in executive/professional roles, followed by retail and IT and computing.

“While it is still a wait and see approach to hiring, with February data showing companies continue to hold back on recruitments, the softer decline could be an indication that expectations of further interest rate cuts and better than expected recent economic data are starting to release some of the pressures on business,” Jon Holt, group CEO and UK senior partner at KPMG, said in the press release.