New reports reveal slump in growth and new jobs

Recruiters have reported that pay, including starting pay, is rising at the slowest pace in over four years, according to the new reports published by REC and the CIPD, adding to signs of a weakening jobs market.

In its report - monitored by the Bank of England - the Recruitment and Employment Confederation (REC) said growth in starting salaries in July was the weakest since March 2021, while pay for temporary staff grew by the least in five months. REC said higher payroll costs and weak confidence contributed to a steep fall in permanent appointments in July.

The UK Report On Jobs also says that starting inflation slipped to the lowest in nearly four-and-a-half years, that permanent placements and temp billings continue to decline, and there is evidence of a rapid upturn in candidate supply amid reports of redundancies.

According to the survey sponsors, accountancy firm KPMG, economic uncertainty, the complexities of AI adoption and global headwinds are all contributing to the slump in pay growth, and impacting business planning.

Separate reports based on analysis from the CIPD's latest Labour Market Outlook, paint a similar gloomy picture for pay and hiring intentions for UK businesses.

Based on a poll of more than 2,000 employers, the CIPD Report found that hiring intentions have dropped to their lowest levels outside of the COVID-19 pandemic as employers grapple with rising national insurance and wage costs.

The report also found that only 57 per cent of private sector organisations plan to recruit in the next three months, down from 65 per cent in Autumn 2024.

Further, 84 per cent of companies taking part in the survey said their costs have risen following changes to employers' national insurance contributions (NIC) and increase in the minimum wage, which were first announced in the 2024 autumn budget and came into force in April this year. A third (32 per cent) of companies said these changes had a significant impact on costs, with the pressure said to be even greater in the care and hospitality sectors, with half of employers seeing costs rise significantly.

Employers that hire staff under the age of 21 are among those hardest hit, with 37 per cent reporting higher costs, compared with 23 per cent of companies that do not hire young people, despite under-21s being exempt from employer NICs.

Many businesses (15 per cent) also cite energy costs as another factor that is contributing to rising financial pressures.

Recruitment Intentions

The hiring slowdown is not limited to the private sector. Public sector employers are also now more likely to cut their workforce than expand it.

Recruitment challenges are particularly acute in care, social work and healthcare services, where the net employment balance dropped significantly from the previous quarter of 2025.

Across the economy, 31 per cent of employers report hard-to-fill vacancies, but the median expected basic pay increase for the next 12 months remains at three per cent for both public and private sectors.

How to enhance wages with benefits

More and more recruiters and businesses are turning to worker benefits as a cost-effective - sometimes free, depending on the provider - boost for remuneration packages, and a tool that helps offer workers more incentives than pay rates alone at a time when companies and organisations are looking for creative ways to navigate and demanding, and rising, financial challenges.

A leading example is the Work Wiz Wellbeing and Benefits App. This value-added employee perks app unlocks access to a vast array of inclusive features, and is designed to enhance and support a better employment experience for everyone in their workforce.

Workers and employees have access to a complete package of 24/7 GP and mental health support, money-saving lifestyle discounts and streamlined employment communication in an easy to use mobile portal. The app, developed, implemented and supported by Magic Connect, is available FOC to recruiters and companies that partner with one of the many expert providers from the Magic Connect network.

About us

Magic Connect are strategic workforce solutions consultants. We help organisations solve workforce challenges by matching them with the most suitable partners, based on operational needs, compliance demands, and long-term outcomes.

As an independent consultancy, we draw from a network of specialist partners, each vetted for expertise in regulated sectors, contingent labour models, and compliance-focused delivery.

What sets us apart is how we work. While many consultancies and brokers offer surface-level recommendations, Magic Connect provides hands-on support to ensure every solutions is effectively implemented, integrated, and aligned with the client's existing structure. This includes onboarding assistance, internal communications, and full activation via Work Wiz - our mobile first platform that centralises engagement, benefits, payslips, and wellbeing tools.