UK Jobs Market Cools in December as Starting Salaries Rise, Survey Shows

Britain’s jobs market showed further signs of cooling in December, even as starting salaries for permanent roles increased at a faster pace, according to a closely watched survey of recruiters that will be reviewed by the Bank of England when considering future interest rate cuts. The findings highlight a labour market marked by caution, cost pressures, and selective competition for skilled workers.

The monthly survey from the Recruitment and Employment Confederation (REC), conducted in partnership with KPMG and published on Monday, revealed that hiring activity fell for the 39th consecutive month. The decline was also the steepest in four months, underscoring ongoing weakness in recruitment demand across the UK economy. Employers cited rising costs and uncertainty, with many pointing to a payroll tax increase introduced in finance minister Rachel Reeves’ 2024 budget as a key factor dampening hiring appetite.

Despite softer hiring conditions, the survey showed that average starting salaries for permanent jobs rose at the fastest pace since May. This increase reflects firms competing for candidates with in-demand skills, even as overall wage growth remained below its long-term average. According to KPMG’s UK chief executive Jon Holt, the jobs market at the end of 2025 continued to signal caution, with businesses pausing recruitment and relying more heavily on temporary staff to remain flexible amid economic uncertainty.

The REC survey indicated that its permanent staff placements index fell to 44.3 in December, the lowest level since August, while temporary staff hiring also weakened. Candidate availability for permanent roles edged higher, but vacancies declined, suggesting a loosening labour market. REC Chief Executive Neil Carberry noted that the December slowdown might prove temporary following some improvement in the second half of 2025.

The data comes as the Bank of England weighs its next policy move after cutting interest rates by 25 basis points to 3.75% in December. Policymakers remain divided between concerns over inflation and signs of a labour market downturn, while investors expect one or two additional rate cuts in 2026.