Hiring intentions at lowest level in nearly 15 years
British businesses are the most pessimistic about hiring they have been in nearly 15 years, according to consultancy firm BDO.
UK bosses are facing difficult hiring decisions as the cost of employment ramps up, with the BDO’s employment index at its weakest reading since March 2011.
The index, which reflects hiring intentions, held at 93.30 in February, continuing a sustained run of multi-year lows.
Labour’s workers’ rights reforms and hikes to minimum wages are weighing heavily on businesses, with chief executives sound the alarm over record levels of youth unemployment.
The pace of decline in hiring intentions has slowed slightly in recent months but meaningful recovery seems unlikely, BDO said.
Service sector boost defies employment gloom
Despite the gloomy employment outlook, business output in the UK is at its highest level in a year.
A bounce in the services sector drove economic activity to increase for the third consecutive month, according to BDO’s output index.
Improvements in sales pipelines and new customer inquiries in the services industry pushed the UK economy to offset gloom around growing unemployment and hiring costs, according to researchers at the firm.
The index, which measures activity across key sectors in the economy, increased to 98.80 in February, up from 97.67 the previous month.
The rosy outlook for the services sector comes despite the industry resorting to job cuts and price hikes in the face of rising cost pressures from government policy.
The sector, which contributes to around 80 per cent of the UK’s GDP, has been forced to make “solid” payroll cuts.
The industry continues to face the effects of Chancellor Rachel Reeves’ maiden Budget, in October 2024, which included a 1.2 per cent hike to employer’s national insurance contributions.
The tax raid took a major chunk out of firms’ bottom line, and came alongside hikes to the minimum wage, piling more cost pressures onto employers.
The hospitality sector also drove the service sector bounce, researchers said, with the government’s £300m business rates relief package encouraging activity.
In January, Reeves bowed to significant pressure from the hospitality industry over the cost of Budget reforms to business rates, handing tax breaks to pubs and live music venues.
The boost in output may be short-lived, BDO’s research warned, as the conflict in the Middle East and the threat of further US tariffs could weigh heavily on UK businesses.
Scott Knight, head of growth at BDO, said: “Global disruption puts the spotlight firmly on the economy. While momentum is building in pockets of the economy, real growth is impossible without targeted action to fix the floundering labour market.”