The number of jobseekers rose “sharply” in December alongside a slump in demand for new hires, analysis has shown, posing a threat to the future of the UK labour market.
Analysis of S&P Global’s purchasing managers’ index (PMI) indicated the jobs market weakened further at the end of last year, undermining hopes of a recovery in vacancy numbers and hiring trends.
KPMG and Recruitment and Employment Confederation (REC) researchers said staff appointments fell again in December, the 39th consecutive month of decline in permanent staff placements.
The headline PMI for the permanent placements index was 44.3, well below the neutral 50-figure threshold and the lowest score recorded since August.
Temporary billings also fell at a faster pace in the final month of 2025.
Data also showed a “marked reduction” in demand for workers and candidate numbers continuing to expand at a rapid pace due to more redundancies.
Jobseekers also struggled to find new gigs, according to analysts.
Labour market woes dampen spirits
The figures dampen hopes of a slight recovery in the jobs market forecast by some economists and lobbyists, with Labour government officials to come under fire for piling costs on sectors such as hospitality and manufacturing.
While employers have had to respond to changes in national insurance payments last April, they will now have to work through new regulations implemented through the Employment Rights Bill.
Businesses got a small win in seeing time periods for unfair dismissal claims get extended from one day to six months despite having to see the compensation cap on successful cases removed.
Other aspects of the bill remain unchanged while some will be subject to review under 26 consultations, with business executives hoping to persuade officials to back them over union bosses.
“The fact that the market slipped back a little in November is a reminder of the pressure employers are under,” Neil Carberry, REC chief executive, said.
“The second half of 2025 showed some signs of a long run of negative data softening, and with placements falling at a slower pace than the 2025 average in December there is some hope that we are seeing a December dip, rather than a change in the trend.
“With the Budget behind us, the government needs to set out a clear path that firms can believe in, from the industrial strategy to pragmatic approaches on the Employment Rights Act, which is worrying many firms.”
City jobs also drop
Top earners in London have not escaped the troubles suffered by the rest of the UK.
A separate survey compiled by Morgan McKinley, the recruitment agency, pointed to a 13 per cent decrease in financial services jobs available across London in the fourth quarter of last year compared to the period between July and September.
Brokers and administrators suffered most, with job numbers declining across both areas, while fintech saw a 50 per cent rise in hiring year-on-year.