The poll of recruiters by KPMG and the Recruitment and Employment Confederation found firms scaling back hiring and increasing redundancies in June due to jitters about the economic outlook, while cost-of-living pressures motivated people to find work. 

The result was the fastest increase in labour supply since December 2020 and the smallest bump in starting salaries for over two years. 

Claire Warnes, skills and productivity partner at KPMG, described the figures as a “big concern for the economy”. However, they are likely to be welcomed by Bank of England rate setters struggling to get a grip on inflation.   

Governor Andrew Bailey and his colleagues say the source of the problem is the tight labour market. Firms competing for scarce workers have been ramping up wages and then raising prices to protect their profit margins. How quickly those pressures fade will determine the scale of future interest-rate increases.

Permanent placements fell again across the UK last month and vacancies grew at their slowest pace for over two years, with worried firms often choosing temporary over permanent staff. Demand for workers fell in the IT, computing and retail sectors. 

“Recruiters that recorded lower placements mainly linked this to uncertainty over the economic outlook and a subsequent slowdown in staff hiring, with recruitment freezes and delays around decision making often noted,” the REC report said.

Chief executive Neil Carberry nonetheless noted that the labour market remains tight, with accountancy, teaching and nursing among the sectors struggling to find and retain staff. DM