Britain suffers worst downturn in jobs market since Covid

Britain is suffering the worst downturn in the jobs market since lockdown as tax hikes and Donald Trump’s trade war hammers business confidence.

The number of people looking for work has risen at its sharpest pace since December 2020, figures on Friday showed, fuelled by a lack of job openings and an increase in redundancies.

According to KPMG and the Recruitment and Employment Confederation, recruiters reported a surge in the availability of permanent and temporary workers looking for jobs in March. This sent the ratio of jobseekers to vacancies to its highest level in more than four years.

Permanent job placements have now fallen each month for two and a half years, with vacancies down in every sector, including those which had been major growth industries such as nursing, medical and care jobs, according to the report.

Rachel Reeves’s tax raid on employers and the increase to the minimum wage as well as mounting uncertainty over Mr Trump’s tariffs have been blamed for casting gloom over the UK jobs market.

The rising pool of jobseekers will alarm the Chancellor amid repeated warnings that her £25bn National Insurance increase for employers would prompt companies to shelve hiring plans.

Jon Holt, chief executive of KPMG, said: “At a time when global uncertainty is peaking and businesses are assessing the impact of market volatility alongside rising employment costs, the latest data demonstrates how the economic reality continues to weigh heavy on the labour market.

“Recent global events have put pressure on any growth prospects in the UK, so it is unlikely that we will see an improvement in the data in the near term.”

The bleak jobs data comes amid warnings from officials about the crippling impact that Mr Trump’s trade war could have on the UK.

Sarah Breeden, Bank of England deputy governor, warned on Thursday that US tariffs would hit growth and “weigh on UK activity”.

She said uncertainty over global trade would have “a chilling effect on business and consumer behaviour, weakening both activity and inflationary pressure”.

However, she suggested slashing rates to boost the economy was not a clear-cut decision because a weaker pound could stoke inflation.

Ms Breedon also played down the idea that the Bank of England would intervene in the bond market – even as it paused a sale of long-term debt.

Threadneedle Street said it would postpone a sale of longer-term bonds “in light of recent market volatility”, as borrowing costs rose sharply over fears the US president’s tariffs would spark a financial crisis.

Ms Breeden blamed the US “spillover” for ructions in the UK market and downplayed the idea the Bank could intervene.

“It is not obvious when the pressure is coming from the US market for us to intervene in the gilt market.” she said.

The labour market downturn comes as households also cut back on spending amid fears of an economic slowdown, according to Deloitte.

Half of those surveyed by the consultancy said they had less money to spend in the current quarter than in the first three months of the year, with persistent inflation pushing up the cost of essentials.

Sentiment towards the economy also fell, holding back spending, said Deloitte’s Celine Fenech.

She said: “The consumer recovery appears to have stalled despite continued strong wage growth, with uncertainty around the economy and other factors such as geopolitical tensions playing on the minds of consumers.

“As inflation persists, particularly on food and utilities, consumers are being more tactical in the way they spend, with a focus on essentials and looking for discounts and promotions when making purchases.

“Consumers remain nervous about how to manage the cost of living and therefore spending is likely to remain subdued and targeted.”

Meanwhile, shops suffered a 5.4pc drop in footfall in March compared to the same month of 2024, though the British Retail Consortium said 2025’s late Easter is in part to blame.

However, Helen Dickinson, the industry group’s chief executive, said economic worries show the need for the Government to be more supportive of the sector rather than hitting it with tax rises.

She said: “Global uncertainties resulting from tariffs and a potential economic slowdown could reduce the appetite for shopping trips in the coming months. The Government must find ways to boost consumer confidence and ensure retailers can invest in jobs and stores.

“The upcoming business rates reform, aimed at supporting high streets could make the situation worse for thousands of retail stores caught by the proposed new, higher threshold. This is why it is vital that no store pays more as a result of these reforms.”

A Treasury spokesman said: “Since the general election, there are 190,000 more jobs in the economy as the Government goes further and faster to kickstart economic growth.

“This week we have announced a multibillion-pound investment in a major new Universal theme park to create 28,000 jobs, we have unveiled plans to support British carmakers and announced action to grow our life sciences industry.

“But in a changing world we know there is more to do. That is why our Plan for Change is about creating growth, jobs and putting more money into people’s pockets.”