Firms slash jobs at fastest pace this year and pay growth slows
Businesses slashed jobs at the fastest pace in 2026 as employers also resisted giving staff big pay increases over March, research has suggested, exposing the Iran war’s damaging effects on all sides of the UK economy.
Research by the Recruitment and Employment Confederation (REC) and KPMG said there was a steeper rise in the number of job seekers over March.
The rise in the availability of candidates was caused by higher numbers of redundancies and general job scarcity, according to researchers, leaving the UK jobs market exposed to damage from the war in Iran as the effects trickle through over the coming weeks.
Analysts suggested high street stores were worst affected, with retail and hospitality “struggling” from difficult conditions on labour costs and softer demand from consumers.
The permanent placements index, which measures the numbers of people in full-time roles, slightly improved from last month but continued to point to a decline in jobs.
Temporary recruitment also fell more slowly than in March while the number of vacancies also dropped across both the private and public sector.
Jobs market weakens furthe
Jobs figures for March may leave economists and policymakers conflicted, with data in March not showing a marked break from trends over several months.
However, there may be concerns that turbulence in trade across the Middle East could rattle businesses over the next few months, with the overall jobs market already suffering from a higher level of unemployment and a sustained decline in vacancy numbers.
REC chief executive Neil Carberry said the Labour government’s cost of living focus could be helped by tackling “the rising cost of doing business”.
“The Gulf Conflict provided a headwind to hiring in March but this did not stop the trend of stabilisation that has defined 2026 so far,” Carberry said.
“Business prospects for 2026 remain finely balanced, and confidence will be key. Households and businesses are still sitting on cash that might be put to work in the economy if the climate is right, boosting growth and particularly helping struggling consumer-facing sectors.”
Data collected by the two organisations also showed that starting salaries increased at the weakest rate in five months, suggesting that pay growth is slowing.
Bank of England rate-setters closely monitor levels of pay growth over fears that higher inflation could push up wages, leading to a spiralling effect in price growth.
Weakened demand levels from a rise in unemployment and the risk of a recession could also drive the case for interest rates to be cut and ease costs for households and businesses.