UK business output contracted in November, marking the first economic shrinkage of the year, according to BDO's output index.

This contraction has led to a significant drop in business confidence, which has fallen to its lowest level since January 2023, driven by rising costs and decreasing consumer demand.

The decline in business confidence is largely attributed to recent increases in business taxes, which have discouraged investment and recruitment across various sectors.

The KPMG and Recruitment and Employment Confederation (REC) report highlighted a sharp and accelerated decline in staff demand for the 13th consecutive month.

In November 2024, job vacancies in the UK fell at the fastest rate since the pandemic began, reflecting the steepest decline since August 2020.

This decline was particularly severe for permanent positions, indicating a further deterioration in the labor market.

Retailers are bracing for significant job cuts due to tax increases announced in Chancellor Rachel Reeves's October budget, as noted by Bank of England Governor Andrew Bailey.

KPMG's CEO, Jon Holt, pointed out that businesses are facing increased employee costs following the budget, which is contributing to a slowdown in hiring activities.

Wage inflation remained stable at a 44-month low in November, as the slowdown in the job market and an increase in candidate numbers exert downward pressure on wages.

The British Retail Consortium estimates that the rise in employer National Insurance Contributions will cost retailers £2.3 billion starting in April 2025, compounded by a rise in the national minimum wage costing an additional £2.7 billion.

Despite these challenges, Neil Carberry, CEO of the REC, expressed hope in the resilience of temporary recruitment amid the current uncertainties in the job market.

Looking ahead, Bailey suggested there could be four interest rate cuts in 2025, which could potentially boost growth and stabilize the labor market if businesses regain confidence.