Business confidence in hiring has fallen to its lowest point in 15 years as the combined pressures of the Middle East conflict and political turmoil within the Labour government push employers toward temporary contracts and away from permanent recruitment, new figures show.
Permanent staff hiring fell at its sharpest pace in ten months in May, according to a closely watched survey by accountants KPMG and the Recruitment and Employment Confederation — with employers responding to the uncertainty by turning to temporary workers instead, who saw a sharp rise in demand.
KPMG boss Jon Holt said the figures reflected a growing caution across the business community. “Ongoing global and domestic uncertainty is making businesses more cautious, and that is increasingly reflected in hiring decisions. While some employers are turning to temporary contracts to retain flexibility, many permanent hiring plans are being delayed or put on hold.”
The figures coincided with a separate employment index compiled by accountants BDO — measuring hiring intentions, job numbers and labour demand — which fell to a fresh 15-year low. Scott Knight, head of strategy at BDO, said the outlook for the services sector was increasingly gloomy. “As the impact of ongoing conflicts and domestic uncertainty filters through, businesses, particularly those in the services sector, are bracing for further cost pressures. Hopes for growth are dimming.”
The deteriorating picture arrives days after the Organisation for Economic Cooperation and Development forecast that Britain will suffer the biggest rise in unemployment among G7 nations this year — a projection that will intensify pressure on a government already facing questions about its economic management.
Businesses have pointed to Labour’s increases in employer National Insurance contributions, rises in the minimum wage and new workers’ rights legislation as contributing factors crushing confidence and making permanent hiring increasingly unattractive. The Iran conflict, which has driven oil prices toward $100 a barrel and disrupted global supply chains, has added a further layer of uncertainty that employers in the services sector appear particularly ill-equipped to absorb.
The shift toward temporary contracts rather than permanent hires is a telling indicator of how employers are managing the moment — maintaining flexibility rather than committing to long-term workforce expansion in conditions they cannot confidently predict.
