Rachel Reeves' Tax Hikes Spark 1980s Backlash Amid Investor Exodus

The UK Jobs Market Faces a Severe Drought

The UK jobs market is experiencing a significant downturn, with concerns growing over the impact of government policies and technological advancements. James Reed, CEO of recruitment giant Reed, has warned that the situation mirrors the challenges faced in the 1980s, but this time affecting white-collar workers rather than blue-collar employees. This warning comes as new data highlights a troubling trend in the labor market.

Reed pointed out that a "severe jobs drought" is being exacerbated by the rise of artificial intelligence (AI) and increased employer National Insurance contributions. According to a survey commissioned by Reed, 22% of respondents indicated they are planning to reduce hiring due to the increase in National Insurance. Additionally, 15% said AI would also affect their recruitment plans. In total, 21% of firms have implemented a hiring freeze, signaling a broader slowdown in job creation.

A Decline in Investment and Business Confidence

The CBI has released findings that reinforce these concerns, showing that 86% of respondents believe the UK labor market is less attractive for investment compared to five years ago. Of these, 54% described it as "much less" attractive, while 82% expect this trend to continue. The CBI/Pertemps Employment Trends Survey identified labor costs as the top threat to market competitiveness, with 73% of respondents citing this as a major concern.

Employment regulations and access to skills follow closely behind, with 65% and 58% of respondents highlighting these issues, respectively. The main drivers of concern around employment costs include National Insurance contributions and the Employment Rights Bill, with 69% and 53% of respondents expressing worries about these factors.

Impact on Business Growth and Job Creation

Nearly 80% of companies believe the Employment Rights Bill will negatively affect growth, investment, jobs, and employee benefits. This concern has grown since last year, when only half of firms were worried. The survey also revealed that 27% of respondents expect their organization to be smaller in the next 12 months, slightly more than those planning to grow (26%).

The CBI emphasized that recent increases in National Insurance contributions and the National Living Wage have made it harder for firms to hire, invest, and grow. These changes add an additional £24 billion in costs for businesses annually, highlighting the financial strain on companies.

Calls for Policy Reforms and Stability

Carmen Watson, chairperson of Pertemps, stressed the need for policies that restore business confidence and support sustainable job creation. She noted that 86% of respondents feel the UK has become a less attractive place to do business over the past five years, with 82% expecting this trend to continue. Watson called for clarity on non-apprenticeship training funding from April 2026, as 67% of respondents say current uncertainty is holding back training plans.

Matthew Percival, CBI future of work and skills director, warned that unless policymakers take urgent steps to ease regulatory and cost pressures, the UK risks undermining its competitiveness. He emphasized the need for action in areas such as labor costs, regulation, and skills investment to safeguard the labor market’s resilience and attractiveness.

Challenges Faced by Jobseekers

Despite some positive signs in sectors like social care and hospitality, the job market remains challenging for many. Reed's data shows that job postings on its site fell by 18% year-on-year in August, with applications dropping by 25%. However, average salaries increased by 1.4%, indicating a complex landscape for both employers and job seekers.

Jobseekers reported a tough environment, with 41% having to compete for fewer vacancies. Nearly 40% said there are too many applicants, and 39% felt the jobs they applied for did not pay enough as living costs continue to rise. A third of respondents would only leave their current job for a significant pay raise, while 57% value job security in their current roles.

Despite these challenges, 61% of jobseekers believe the market will improve, with 26% planning to look for new opportunities once conditions improve. While optimism is present, the need for targeted measures to support jobs remains critical. Reed has taken an unprecedented step by offering a million free job postings on its platform, signaling a commitment to addressing the ongoing challenges in the labor market.