Hiring appetite among UK businesses has slumped to its weakest point in 13 years, as rising taxes, policy uncertainty and cost pressures weigh heavily on employer sentiment.
According to the latest BDO Business Trends barometer, recruitment confidence has dropped to levels last seen in 2012, with companies across the UK adopting a more cautious approach to hiring amid mounting costs — including the April rise in employers’ national insurance contributions, which added an estimated £20 billion a year to payroll expenses.
Despite a modest summer uptick in output, largely driven by consumer-facing services and strong hospitality trade around major events like Royal Ascot, the broader outlook remains subdued. BDO said its findings point to “prolonged caution” among firms, with many choosing to delay hiring decisions.
Scott Knight, head of growth at BDO, said: “We’re seeing early signs of recovery in business output, largely down to the services sector who have buoyed the economy for a second month in a row. But, as we all know, we can’t rely on good weather forever.”
The survey, which captured data from 4,000 companies, also showed that overall business confidence declined in June compared to May. BDO warned that speculation over further tax hikes in the autumn budget is dampening sentiment even further — particularly after the government’s recent reversal on proposed welfare reforms, which has prompted fears of increased business taxation to plug the fiscal gap.
Separate analysis from the CBI revealed a similarly downbeat picture within the financial services sector. Business volumes fell at their fastest pace since late 2023, with profitability and optimism deteriorating. Financial firms are also preparing for a sharp reduction in hiring — the net balance of firms expecting to cut jobs worsened from +2% in March to -7% in June, with projections for September plunging to -52%.
Alpesh Paleja, deputy chief economist at the CBI, said: “Conditions deteriorated in the financial services sector over the second quarter, with business volumes falling and sentiment dropping sharply. Firms are bracing for tougher times, expecting to cut back on both hiring and investment.”
Concerns are also growing within the banking sector over the possibility of fresh tax rises. With the chancellor under pressure to fund revised welfare commitments and offset weaker-than-expected tax receipts, speculation has mounted that financial services could again be in the Treasury’s crosshairs.
Currently, banks pay both a profits surcharge and the long-standing bank levy, together generating £4.2 billion a year for the Treasury. Senior figures in the sector are reportedly alarmed by a leaked memo from Deputy Prime Minister Angela Rayner earlier this year, which suggested the bank levy could be raised.
Although financial markets were relatively stable during the CBI’s survey period (May 29 to June 16), and fears around President Trump’s tariff threats had receded, the underlying business sentiment remained fragile. With both fiscal and policy uncertainty looming ahead of the autumn budget, UK employers appear increasingly reluctant to take on new staff — a trend that could weigh on broader economic recovery in the months to come.
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UK employers’ hiring confidence hits lowest level since 2012 amid tax and cost pressures