The Recruitment & Employment Confederation (REC) reports mixed sentiment among UK employers regarding hiring, as optimism clashes with worries over rising payroll taxes and new workers' rights legislation. While hiring intentions improved recently, economic confidence dipped sharply, signaling potential challenges to a labour market rebound. Rising national insurance contributions and minimum wage increases pose additional pressures on businesses, particularly in lower-paid sectors. Despite some surveys indicating reduced hiring, economists caution against overestimating their impact based on sentiment alone.
While improving hiring intentions suggest a jobs comeback this year, the extent of any bounce back depends on the economic and political headwinds on firms easing a fair bit.
The REC's economic confidence index plunged by 12 points over the quarter to a net minus 35, signalling deepening concerns about Britain's growth prospects.
Combined, these changes represent a £25 billion increase in payroll taxes affecting hiring, especially in sectors like hospitality, care and retail.
Although private sector surveys have indicated that employers may cut hiring to offset rising NICs, some economists have warned such surveys may overstress sentiment.
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