Market News

The UK has suffered the fastest slump in new hiring in Europe as the employment market struggles to recover from Rachel Reeves’s £26bn tax raid.

British employers’ intentions to make new hires have fallen at the sharpest rate out of 21 European countries, according to recruiter ManpowerGroup UK.

The decline in the UK is much more severe than in other large European countries such as France and Germany.

According to the research, 41pc of bosses planned to hire more and only 13pc were considering cuts before last year’s autumn Budget – a difference of 28 percentage points.

Such optimism has all but evaporated with the gap between those looking to hire and fire before the end of 2025 shrinking to a new low of 11 points.

This marks a 17-point decline over the past year while France and Germany experienced falls of eight and five points respectively.

Petra Tagg, the director of ManpowerGroup UK, said: “It’s a tough outlook for the UK at the moment.

“Whereas last year the same pressure was being felt across Europe, this year the UK labour market is steering its own course and it’s unlike one we’ve faced before.”

The figures come after the Chancellor piled most of her record £40bn tax increase last autumn on employers.

Meanwhile, more change is looming for Britain’s job market as the Chancellor is preparing another large tax raid this autumn predicted to be between £20bn and £30bn.

Any further squeeze on employers risks extending a three-year decline in hiring across the UK that followed a post-Covid hiring boom. The current slump has lasted longer than even after the financial crisis.

Ms Tagg said: “The UK economy has stalled and with it so has hiring. The labour market has been moving at an almost glacial pace for months.

“What’s needed now is a corrective course of action – relief on employment costs, clarity on policy timelines and bold investment in long-term infrastructure and pragmatic innovation.”

She warned that employers were weighing up where they fill gaps with artificial intelligence and automation rather than by taking on more workers.

A spokesman from the Treasury said: “Three hundred and eighty thousand jobs have been created since the start of this parliament and business confidence is at its highest in over 10 years, according to a recent Lloyds Bank survey.

“That is because we are a pro-business government which has seen interest rates fall five times, struck three major trade deals with the EU, US and India, reformed business rates and capped corporation tax at 25pc.

“We are delivering on our Plan for Change to put more money in the pockets of working people because years of instability and underinvestment have left an economy that is not working for them.

“We are investing in Britain’s renewal to reward working people.”