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UK 'heading for recession' amid 'jobs car crash' sparked by national insurance hike, recruitment giant warns
6 December 2024, 13:58 | Updated: 6 December 2024, 17:07
One of the UK’s biggest recruiters has warned that the UK is heading towards recession, blaming the chancellor’s National Insurance hike for a slump in the jobs market.
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The chairman of recruitment giant Reed told LBC that its data showed a 13% month-on-month decrease in job listings since October, and a 26% decline in comparison with November 2023, figures which, historically, have resulted in the UK entering a recession.
James Reed argued that the UK jobs market is facing an “accelerating car crash”, and that in seeking to address the £22 billion black hole they say had been left by the previous administration, the government has created “a million black holes” in companies’ balance sheets.
Asked about how businesses were responding to the plans to increase employers’ national insurance contributions, Mr Reed said: “Pretty much everyone I’m talking to is looking at ways to mitigate this. I’m concerned that this will lead to rising unemployment and, perhaps worse, recession because business confidence has taken a big hit.”
When pressed further on whether a recession is on the cards, Mr Reed added “it’s a red light flashing. When I have seen this sort of level of decline [in the jobs market] in the past, that’s been the consequence - recession.
“We saw the recession coming at the end of 2023 before the Bank of England and others did because our job data indicated it. I’m worried that this might be indicating another dip, yes.”
It comes as a further blow to the government after the Confederation of British Industry today downgraded its growth projections for the UK economy from 1.9% to 1.6% in 2025.
In a keynote speech delivered yesterday, Sir Keir Starmer outlined six priorities by which to judge his government, putting a pledge to raise living standards and increase people’s disposable income at the heart of the government’s work.
Underpinning this objective is a target for the UK to achieve the highest sustained rate of economic growth in the G7 group, which also includes the United States, France, Germany, Italy, Japan and Canada.
However, Reed’s data suggests that target could be undermined by a job market that is resembling a “slow-motion car crash”.
“The job market is in trouble”, he said. “What we’ve seen in the labour market - and I’ve characterised it as a slow-motion car crash - in the last two years is a steady decline in job vacancies… that car crash is accelerating now. The November statistics we have from Reed show those vacancies declining further and faster.
“I think they [the government] were still cheering the one penny off a pint of beer in parliament when the phone started ringing and business owners were asking their accountant saying how big a hit this national insurance increase is for employers.
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“This is people’s livelihoods - and future lives at work - which are going to be affected… it’s a declining picture and it’s declining faster.”
Starmer said in response: "If you look at the last 5 months, and the work we've done to stabilise the economy and create the conditions we're in for the inward investment, which is the real stimulant for wealth creation, for jobs, and for growth - I think you'll see in the Investment summit we had just a few weeks ago 63 billion pounds worth of investment coming into this country, which is measured in jobs around the country - and that is the biggest inward investment into this country ever.
"And that shows that those that have the ability to invest, that will result in the jobs of the future, have confidence that now is the time to invest in the UK. So I'm very pleased that that's happening and you know in addition to that the way in which the government is working the deal here at Hitachi, that's the work that we're doing and I'm very pleased that we're delivering in that way."
