By Carl Court,Jon Robinson

Copyright cityam

Britain’s jobs market is being hollowed out just like it was in the 1980s thanks in part to Chancellor Rachel Reeves’ tax hikes, the chief executive of recruitment giant Reed has said, as the CBI warns the country is now seen as a less attractive place to invest than five years ago.

James Reed said there is a “severe jobs drought in the UK” which is being “exacerbated by the march of AI and factors such as the government’s increase in employer’s National Insurance” contributions.

He added that “we may be facing a hollowing-out of jobs in the same way that we did in the 1980s, except for white collar rather than blue collar workers”.

Reed’s comments have been made as a new survey commissioned by the recruiter revealed 22 per cent of those asked said they would be cutting back on hiring because of the rise in National Insurance.

The data also shows that 15 per cent said AI would also curtail their recruitment plans.

In total, 21 per cent of firms said that they had implemented a hiring freeze.

‘No doubt tax hikes have made it harder for firms to hire, invest and grow’

The figures from Reed have been published a day after a new survey headed by the CBI revealed that 86 per cent of respondents believe the UK labour market is a less attractive place to invest and do business compared to five years ago.

The data also shows that 54 per cent of respondents ranked it as ‘much less’ attractive while 82 per cent expect this trend to continue.

Meanwhile, the CBI/Pertemps Employment Trends Survey outlined that labour costs have been identified as the top threat to current market competitiveness – being selected by 73 per cent of respondents.

The impact of employment regulation on flexibility ranked second (65 per cent), followed by access to skills (58 per cent).

According to the survey, the main main drivers of concern about the cost of employing people are National Insurance contributions and costs coming from the Employment Rights Bill (selected by 69 per cent and 53 per cent of respondents, respectively).

Nearly eight in 10 companies (78 per cent) believe the Employment Rights Bill will hit growth, investment, jobs and/or discretionary employee benefits.

The CBI said this concern has grown since last year when half of firms (54 per cent) were worried.

The survey also shows that 27 per cent of respondents expect their organisation will be smaller than it is today in 12 months’ time, slightly more than the proportion intending to grow (26 per cent).

In a statement, the CBI said: “There is no doubt that the recent rises in National Insurance contributions (NICs) and the National Living Wage have made it harder for firms to hire, invest and grow. 

“Taken together, the increase in NICs and the past three National Living Wage increases add up to an additional cost of over £24bn for businesses each year.”

Reshuffle ‘timely chance’ to reset Labour’s growth agenda

Carmen Watson, chairperson of Pertemps, said:  ”This year’s findings underline the scale of change in the UK labour market and reinforces the urgent need for policies that restore business confidence and support sustainable job creation.

“The fact that 86 per cent of respondents feel the UK has become a less attractive place to do business over the past five years and that 82 per cent believe it may become less attractive in the years ahead, highlights a clear opportunity for government to work with employers on a pro-growth, pro-skills agenda.

“Similarly, the 78 per cent of firms who are concerned about the higher employment cost implications arising from the Employment Rights Bill underlines the importance of ensuring reforms are implemented in a way that supports investment, growth and secure, rewarding jobs.

“The recent government reshuffle offers a timely chance to reset the growth agenda and provide the certainty businesses need.

“On skills, one of the most effective steps would be to give clarity on which types of non-apprenticeship training will be eligible for funding from April 2026.

“With 67 per cent of respondents saying the current uncertainty is holding back training plans, greater transparency would help firms to invest in the people and skills that will drive the UK’s competitiveness in the years ahead.”

‘The UK risks undermining its competitiveness’

Matthew Percival, CBI future of work and skills director, said: “These findings send a stark message: unless policymakers take urgent steps to ease regulatory and cost pressures, the UK risks undermining its own competitiveness.

“Businesses want to invest, hire, and grow – but they need a stable and supportive policy environment to do so.

“Labour costs, regulation, and skills investment are critical areas where action is needed to safeguard the UK’s labour market resilience and attractiveness over the next five years and beyond.

“Businesses recognise that the Employment Rights Bill is happening. The key question is how to deliver it in a way that builds consensus.

“A pro-growth landing zone is possible but it requires changes to the Bill to make probations meaningful, ensure a practical approach to managing variable hours, and a reasonable balance between the right and responsibilities of employers and trade unions.”

‘We need targeted measures to support jobs’

According to Reed’s data, job postings on its site were down 18 per cent year on year in August, while applications also fell by 25 per cent – despite a 1.4 per cent increase in average salaries.

James Reed, chairman and CEO of the Reed group, said: “There is a severe jobs drought in the UK, which is being exacerbated by the march of AI and factors such as the government’s increase in employer’s National Insurance, which has had, as we warned it would, a negative impact on hiring.

“Official figures show we have now had declining vacancies in the economy for three years – something I have never seen in my 49 year career.

“I am concerned that what we are seeing is partly structural, and that we may be facing a hollowing-out of jobs in the same way that we did in the 1980s, except for white collar rather than blue collar workers.

“There are some bright spots on the horizon, with AI-proof sectors such as social care and hospitality doing well, and both employers and jobseekers expecting things to improve in the coming months.

“But we need carefully targeted measures to support jobs. That is why Reed is taking the unprecedented step of offering a million free job postings on Reed.co.uk.”

Majority of applicants believe job market will improve in the future

Reed’s survey also jobseekers reported a tough job market – with two in five (41 per cent) having to fight for fewer vacancies.

Out of the more than 2,000 asked, 39 per cent also said there are too many applicants and 39 per cent said the jobs they were applying for did not pay enough as the cost of living continues to rise.

A third (35 per cent) would only leave their job for a significant pay rise, with more than half (57per cent) valuing the job security in their current role as 51 per cent are concerned about the current state of the job market.

Though only two in five (44 per cent) entry-level and graduate jobseekers are optimistic aboutthe future, the majority (61 per cent) do believe the job market will improve.

More than a quarter (26 per cent) plan on looking for a new job once that day has come.