The UK’s economic sector in August 2025 continues to reflect a cautious approach to hiring and persistent pressures on public finances, as detailed in two key reports from KPMG and the Recruitment & Employment Confederation (REC).
The KPMG and REC UK Report on Jobs for August 2025 and KPMG’s commentary on public finances data offer critical insights into the challenges facing businesses, workers, and policymakers.
Together, these reports paint a picture of a labour market cooling under economic uncertainty and a public sector grappling with rising borrowing and fiscal constraints.
The KPMG and REC UK Report on Jobs, compiled by S&P Global, highlights a continued decline in hiring activity across the UK at the start of the third quarter of 2025.
Permanent staff appointments fell sharply in July, marking the steepest drop in nearly two years, while temporary billings also saw a significant reduction, the fastest in five months.
Recruiters cited weak employer confidence, driven by an uncertain economic outlook and increased payroll costs, as primary reasons for the downturn.
Jon Holt, Group Chief Executive and UK Senior Partner at KPMG, noted that “economic uncertainty, the complexities of AI adoption, and global headwinds” are weighing heavily on business planning.
This caution has led to a substantial rise in candidate availability, with the supply of workers increasing at one of the fastest rates since 1997, largely due to redundancies and reduced job security.
The report also points to a slowdown in wage growth, with starting salaries for permanent staff rising at the weakest rate since March 2021.
Temporary wage growth similarly softened, reflecting lower demand for workers and a larger talent pool.
Only the construction and blue-collar sectors saw increases in short-term vacancies, while retail and executive/professional roles experienced the sharpest declines.
Despite these challenges, Holt suggested that further loosening of monetary policy, such as the Bank of England’s recent interest rate cut, could bolster business confidence.
However, he cautioned that many firms are likely to delay major investment decisions until greater economic clarity emerges in the autumn.
On the fiscal front, KPMG’s commentary on the UK’s public finances, authored by Senior Economist Dennis Tatarkov, underscores the mounting challenges for the government.
In July 2025, borrowing fell to £1.1 billion, the lowest for July in three years, driven by self-assessment tax receipts.
However, this figure masks a broader trend of fiscal strain.
Cumulative borrowing for the 2024/25 fiscal year is projected to reach £135.8 billion, significantly exceeding the Office for Budget Responsibility’s (OBR) October forecast of £105.4 billion.
Tatarkov highlighted that rising inflation and higher gilt yields are likely to increase the cost of index-linked borrowing later in the year, adding further pressure on public finances.
The upcoming Autumn Budget will be pivotal, with Tatarkov estimating a potential £26.2 billion shortfall against current fiscal targets.
This could necessitate difficult decisions on tax rises or spending cuts.
The combination of higher-than-expected interest payments and weaker revenues in recent months has already pushed borrowing above projections, raising concerns about meeting fiscal goals.
Tatarkov emphasized that the OBR’s forthcoming forecast revisions will be crucial in shaping the government’s fiscal strategy, particularly as spending pressures, including debt servicing costs, continue to mount.
Together, these reports highlight a dual challenge for the UK economy: a labour market constrained by cautious hiring and a public sector facing tightening fiscal conditions.
While there are some signs of hope—such as potential interest rate cuts and modest vacancy growth in specific sectors—the overarching sentiment is one of caution.
Businesses are holding back on recruitment and investment, awaiting clearer signals of economic recovery, while the government must navigate a seemingly intricate balance between fiscal discipline and growth-oriented policies.
As the UK heads into the latter half of 2025, the interplay between labour market dynamics and public finance management will be critical in determining the trajectory of economic recovery.