Transcription
We live in the shadow of some sobering figures. According to the latest KPMG and recruitment and employment confederation survey, Britain has just experienced the sharpest rise in job seekers for 5 years. August saw redundancies rise as employers pull back from recruitment. Reflecting, in the words of John Halt of KPMG, a subdued economic outlook and deep uncertainty over what the chancellor will do in her November budget.
Rachel Reeves has not inherited an easy economic context. Slow productivity, global headwinds, headwinds, and high borrowing costs. Yet, critics say her solutions have compounded the problem. In her first fiscal statement, she launched what became known as a 40 billion pound tax raid, including higher employer national insurance contributions, dubbed a jobs tax. And these measures, meant to shore up the Treasury's balance sheet, have instead left employers wary of expanding payrolls.
Speculation is rife that Reeves will expand this national insurance raid in November, potentially hitting 190,000 professionals: doctors, solicitors, accountants, financial advisers. The fear of further hikes has produced paralysis. Businesses are pausing investment, holding back on hiring, and in some cases laying people off in anticipation of higher costs. This is the politics of caution, but it risks becoming the economics of contraction.
The same survey shows the weakest growth in starting salaries for more than four years, with more candidates chasing fewer vacancies. Employers feel no pressure to offer higher pay. Vacancies are declining everywhere except construction. Retail and hospitality sectors, employing millions, are seeing the sharpest falls in permanent posts. The southeast, often the bellwether, recorded the steepest decline. It is a labor market cooling visibly across the board.
Another pressure point is youth unemployment. The number of young people aged 16 to 24, not in education, employment, or training, has risen to 923,000, up from 793,000 5 years ago. For a government promising growth and opportunity, this represents a failure of entry routes into work. It also risks creating a lost generation of graduates unable to translate qualifications into careers.
Parliament's work and pensions committee has warned the Department for Work and Pensions must rebuild trust with employers. It also criticized the current model of pushing benefit claimants into any job after 4 weeks, only for many to cycle back into benefits when the job, when the post proves insecure or unsuitable. They recommend three months instead, which would allow better matching and higher retention.
Reeves' regime is therefore caught between fiscal discipline and the need for humane, effective employment support. Neil Carbury of the REC remarked that employers need a shot of confidence along with their seasonal flu jabs. Without it, confidence will remain fragile, and the KPMG data confirmed that firms are in defensive mode. The more Reeves risks, uh, talks of balancing books by taxing employers, the less likely businesses are to take risks on new hires.
The situation creates a paradox. Reeves is under pressure to cut the welfare bill. Yet her tax strategy is fueling unemployment that makes those costs rise. Labour entered office promising to be the party of work. Yet job seekers are growing at their fastest rate since the lockdown era of 2020. The perception risks hardening that Reeves is a chancellor who taxes jobs rather than creates them.
It's true that, uh, real pay growth has modestly outpaced inflation in 2025, but that is cold comfort when job opportunities are shrinking. The Bank of England, meanwhile, sits on its 4% base rate, unwilling to cut. Businesses therefore face higher borrowing costs, higher payroll taxes, and political uncertainty, and the net effect is to weaken Britain's labor market dynamism.
Rachel Reeves faces a serious test this November. Does she risk another round of tax rises to satisfy the Treasury's numbers? Or does she risk loosening fiscal responsibility to restore business confidence? For the unemployed, the underemployed, and the anxious graduate, this budget may decide whether Britain enters 2026 with the prospect of jobs growth or with the cold grip of stagnation. Reeves claims to be the chancellor of stability. She must now show that she can also be the chancellor of opportunity. But somehow, I think that is beyond her grasp.