Hiring confidence crumbles as employers warn of 'impossible' planning environment
CIPD and BDO data reveal hiring plans at record lows amid Labour tax reforms and sweeping employment law changes
UK businesses are slamming the brakes on recruitment as new figures show employer confidence has sunk to a record low, outside of the pandemic, under mounting cost pressures from tax increases and looming employment law reform.
According to fresh data from the Chartered Institute of Personnel and Development (CIPD), the proportion of employers planning to hire in the coming quarter has dropped to its lowest level since the body began tracking the measure in 2014.
The net employment balance, which reflects the difference between employers expecting to increase staff versus those planning cuts, fell from 13 to 8 in the first quarter of 2025.
The sharp fall comes on the heels of a £25 billion package of business tax rises under Chancellor Rachel Reeves, including an increase to employer National Insurance contributions and a 6.7% hike in the minimum wage to £12.21 an hour from April.
Separate analysis by accounting firm BDO paints an equally bleak picture. Its employment index dropped to 94.11 in April, the lowest in 12 years, prompting warnings from the firm that “it is practically impossible for businesses to plan and invest with so much instability.”
“It is practically impossible for businesses to plan and invest with so much instability,” a BDO spokesperson said. “Firms are focused on constant firefighting just to survive.”
Retailers, already under intense margin pressure, are particularly exposed. Just 1 in 10 plan to recruit over the next three months, while 1 in 4 employers across all sectors are considering redundancies.
In the public sector, the CIPD’s balance score plunged into negative territory, falling from +3 to -4, while the private sector figure declined from +16 to +11, reflecting a more cautious stance even in typically resilient parts of the economy.
The hiring slowdown also coincides with a major push by Deputy Prime Minister Angela Rayner to legislate a new workers’ rights bill.
The legislation aims to scrap zero-hours contracts, bolster flexible working entitlements, raise sick pay obligations, and expand protections around unfair dismissal – all measures that have sparked anxiety among employers already navigating cost volatility.
“It’s a tax on jobs,” one industry leader told Accountancy Age, pointing to the impact of higher National Insurance and wage mandates on business hiring intentions.
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The cumulative effect, say business groups, is a growing reluctance to take on new staff amid a sense of unpredictability in policy direction.
While Labour maintains that the changes are designed to deliver fairness and long-term growth, business sentiment suggests they are landing at a time when many firms are simply trying to stay afloat.
The next quarter will be critical for assessing whether this trend hardens into a wider employment slowdown or stabilises as firms adjust to the new policy landscape.
For now, hiring confidence appears to be in retreat.
