UK Permanent Hiring Falls at Fastest Rate in Ten Months as Iran War Raises Costs and Freezes Plans
Britain’s jobs market cooled sharply in May as employers paused permanent hiring in response to rising energy costs and deepening uncertainty about the economic outlook caused by the Iran war, according to the monthly Report on Jobs published on Monday by accountants KPMG and the Recruitment and Employment Confederation. Permanent job placements fell at the fastest pace since July 2025, extending an unbroken run of contraction to 44 consecutive months — the longest such period since the survey began in 1997. The Local
“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,” Jon Holt, chief executive of KPMG UK, said. The Local
Neil Carberry, chief executive of the REC, said: “The labour market is entering a more unpredictable phase after a solid start to the year.” He said momentum had eased in April after a good start and that this reflected “growing sensitivity to the conflict in the Gulf” as well as the timing of the Easter holidays. Combined with “sudden domestic political uncertainty,” he warned hiring could take a further hit in the coming months. “The likely outcome is a more uneven hiring environment, with some firms pulling back while others continue to support underlying demand,” he said. Global Banking and Finance
The vacancy data tells the same story. UK job vacancies fell by 7.7 percent in April compared with March, dropping to 711,733 positions, while vacancies were also down 5.6 percent compared with the same month last year. The sharpest declines were recorded in jobs for pilots, travel agents and train drivers. Those sectors reflect the direct impact of the Hormuz closure on aviation and tourism, two industries that have faced acute cost pressures since the war began at the end of February. Vacancies for nannies, couriers and sales executives increased, pointing to continued demand in care-adjacent and logistics roles even as professional and technical hiring retreated. Ukrainska PravdaUkrainska Pravda
The cost pressures driving the slowdown are spreading across the economy. Almost 60 percent of employers cited costs as their key priority, as rising energy and supplier bills compounded higher labour costs prompted by last year’s step-up in employer national insurance and increases in the legal minimum wage. The sequence matters: businesses entered 2026 already absorbing the national insurance rise and minimum wage uplift introduced in April, and then faced a second cost shock from the Iran war’s effect on energy prices from March onward. Global Banking and Finance
Richard Austin, a partner at BDO, said firms were no longer concentrating on growth but were instead trying to cope with “the latest economic shock” during a period of global and domestic uncertainty. Ukrainska Pravda
A separate report from the Chartered Institute of Personnel and Development, the professional body for human resources, confirmed the shift in corporate priorities. The CIPD found that UK employers were prioritising cost management over growth, with energy and supplier bills compounding the labour cost pressures already in the system. Global Banking and Finance
The hiring freeze is not, however, universal. A report from BDO found that almost a third of business leaders said they were looking to prioritise UK-based suppliers, and a further 28 percent were considering moving production to the UK or closer to home — potentially providing a boost to British manufacturers as companies seek to protect their supply chains in the light of geopolitical uncertainty. That nearshoring impulse, if it translates into investment, could generate domestic industrial demand even as consumer-facing and professional sectors contract. Global Banking and Finance
The political context adds another layer of uncertainty to the labour market outlook. Bloomberg reported that domestic political turmoil surrounding Prime Minister Keir Starmer’s government — including ongoing tensions with Washington over the UK’s initial refusal to allow US use of British bases at the outbreak of the Iran war — has added to business caution beyond the purely economic factors visible in the survey data.
Regional and Global Impact
Chancellor Rachel Reeves travelled to Paris for meetings with G7 finance ministers to coordinate action between the world’s most powerful nations to limit the economic fallout from the war. Reeves is expected to announce the next phase of support for British households and businesses to soften the impact this week. The scale of that support package, and whether it extends to energy bill relief, business rate adjustments, or direct employment subsidies, will determine how much of the hiring slowdown visible in the May REC survey is reversed in coming months. Global Banking and Finance
For the Bank of England, Monday’s data complicates an already difficult policy calculus. The simultaneous publication of the REC hiring survey and the IDR pay settlements data — both released on Monday — present the MPC with a labour market that is slowing on quantity while holding on price. Permanent placements falling at record pace since July 2025 points toward easing demand-side wage pressure over the medium term, which would support the case for rate cuts. But the energy-driven inflation channel remains open, and the IDR data showed a rising proportion of employers settling at 4 percent or more.
Background
The REC-KPMG Report on Jobs has been published monthly since 1997 and is one of the Bank of England’s primary real-time gauges of labour market conditions alongside official Office for National Statistics data. The 44-month unbroken contraction in permanent placements surpasses the previous record set during and after the 2008 financial crisis. The Iran war began on February 28, 2026, with joint US-Israeli strikes on Iranian territory, triggering the Strait of Hormuz closure that has driven UK energy price increases and supply chain disruption for more than three months. UK employer national insurance contributions were raised in April 2025, and the National Living Wage increased by 4.1 percent to £12.71 per hour in April 2026 — two sequential labour cost increases that have squeezed hiring budgets before the Iran war’s cost shock was added.
What Happens Next
The Bank of England’s Monetary Policy Committee meets next week and is widely expected to hold rates at 3.75 percent. Chancellor Reeves is expected to announce a further household and business support package this week following her Paris G7 meetings. The Office for National Statistics will publish official UK earnings and employment data before the MPC decision, providing a second data point on whether the hiring slowdown visible in the REC survey is feeding through into broader labour market deterioration. REC chief executive Carberry has warned that hiring could take a further hit in coming months, suggesting the May contraction may deepen before the Bank has accumulated sufficient data to respond.
