Rachel Reeves suffered another huge blow after new jobs data emerged (Image: Getty)
Rachel Reeves was dealt another hammer blow as the economic gloom hanging over the UK and spiralling employment costs hit jobs. Hospitality firms have been “taxed out” from hiring this Summer, triggering “the death of the great British Summer job”, industry chiefs warned.
And Labour’s economic plan faced more criticism after a monthly report on jobs showed a “further steep decline” in people taking permanent roles. The influential report by KPMG and REC showed a reading of 40.0 for permanent placements in the UK in July, up marginally from 39.1 in June
But any figure below 50 represents decline in the job market, with levels over 50 showing growth. The data therefore indicated another month of contraction.
Shadow Chancellor, Mel Stride said: “Hardworking families are paying the price for Labour’s economic mismanagement.
“The Chancellor’s punishing Jobs Tax and reckless economic choices have crushed business confidence and seen unemployment go up every month.
“Labour promised growth – instead hiring is collapsing, wages are stalling, and families are being forced to tighten their belts.
“Rachel Reeves hasn’t learnt her lesson and is now preparing yet more tax rises – taxing your future to pay for her failures.
“We can’t afford Labour.”
Allen Simpson, Chief Executive of UKHospitality, said: “At this time of year hospitality businesses are usually frantically hiring staff for the busy summer months, as the sector expects to welcome families to their hotels, serve countless ice creams on the beach, fish and chips on the pier, and cold pints in the pub garden.
“Hiring this year has fallen off dramatically, with 22,000 fewer jobs available compared to last year.
“It is sadly reflective of the impact we have seen from increased costs over the past nine months – less employment, fewer opportunities and less growth in the economy.
“Hospitality is taxed out and without Government action, we face seeing the death of the great British summer job.
“That’s not good for the economy, for businesses, or for the people that need this flexible work and income during the summer.
“We need to see action at the Budget to reverse this damage. That starts with fixing NICs, lowering business rates and cutting VAT for hospitality businesses.”
Experts from The National Institute of Economic and Social Research (NIESR) last week revealed the Government is on course to miss its “stability rule”, under which day to day spending must be matched by tax revenues.
Instead, it is forecast to face a budget deficit of £41.2billion in 2029-30 – the equivalent of 1.17% of GDP.
This means that if Ms Reeves is to preserve her £9.9billion buffer to protect Britain against economic shocks she will have to find £51.1billion through higher taxes and lower spending annually by 2029-30.
Rachel Reeves is under pressure to boost growth (Image: Getty)
Mel Stride has condemned Labour’s record on the economy (Image: Getty)
And prices are set to soar after the Bank of England predicted inflation will rise to 4%, double the official target.
The rising cost of food means shoppers are already abandoning famous brands in favour of cheaper own-label products in an attempt to save money, the Bank warned.
Tax rises introduced by Chancellor Rachel Reeves have contributed to price hikes according to the Bank of England’s Monetary Policy Committee.
Ms Reeves insisted she has a grip on the economy despite being forced to abandon £6.25billion of welfare savings by rebellious Labour MPs and u-turn on her winter fuel payment disaster.
Prime Minister Sir Keir Starmer has opened the door to increasing tax rises this autumn, declining to explicitly rule out breaking Labour’s manifesto pledge not to raise VAT, income tax and corporation tax.
Ms Reeves, in a Sunday newspaper column, claimed the public need to be patient with Labour on the economy.
She warned: “I’m impatient for the change people voted for to be delivered, but I have always known it was never going to happen overnight.”
Jon Holt, group chief executive and UK senior partner at KPMG, said: “The labour market cooled in July as chief execs held back from increasing their recruitment budgets.
“Economic uncertainty, the complexities of AI adoption and global headwinds are all weighing on business planning.”
Recruiters frequently said in the survey that weak confidence about the economy and “increases in payroll costs” were factors causing the drop in hiring.
It pointed towards a “steady” jobs market in certain sectors, such as engineering, but flagged a continued drop in hiring in retail and hospitality.
Meanwhile, starting salary inflation slowed for a second month in a row to its lowest level since March 2021.
The data comes after the Bank of England pointed towards slowing wage growth over the coming year while the unemployment rate could tick higher.
Kate Shoesmith, REC deputy chief executive, said: “There is a path to jobs market recovery – but it will take co-ordinated action from Government, the Bank of England and businesses to maximise on any potential upswing.
“With starting salaries and temporary pay rising only modestly, it was right to cut interest rates last week.
“More action like this, to stabilise the business cost-base, is what will support growth and boost the jobs market this year.”
