UK Starting Salaries See Strongest Growth in 18 Months as Hiring Sentiment Improves

Starting salaries for permanent employees in the UK recorded their strongest increase in nearly a year and a half in January, signaling early signs of stabilization in the British labor market. According to the latest monthly Report on Jobs from KPMG and the Recruitment and Employment Confederation (REC), wage growth for newly hired permanent staff reached its highest level since August 2024, reflecting cautious optimism among employers.

The report also highlighted an easing downturn in permanent job placements. While the number of new permanent staff hires continued to contract, the pace of decline slowed to its weakest level since July 2024. The permanent placements index rose to 46.9 in January, up from 44.3 in December, suggesting that recruitment conditions may be gradually improving after a challenging end to last year.

Recruitment agencies noted that some companies resumed hiring following reduced uncertainty surrounding Chancellor Rachel Reeves’ budget announcement on November 26. This easing of financial and policy concerns appears to have encouraged business leaders to restart delayed hiring plans. Lisa Fernihough, Head of Advisory at KPMG, said the January data offered tentative but encouraging signs that employers are beginning to move forward as confidence slowly returns.

Temporary staffing showed a more positive trend, with hiring activity rising to 50.3 in January from 47.6 the previous month. This increase was largely driven by demand for short-term workers to support new projects and manage workload fluctuations, a common strategy during periods of economic uncertainty.

Despite these improvements, challenges remain in the UK job market. Vacancies fell for the 27th consecutive month, underlining continued caution among employers. Meanwhile, the availability of candidates for permanent roles increased at the slowest pace seen in a year, suggesting a gradual tightening of the talent pool.

REC Chief Executive Neil Carberry emphasized that while the data does not yet point to a broad hiring recovery, the prolonged “wait-and-see” phase appears to be nearing its end. The survey, conducted among approximately 400 recruitment agencies between January 12 and January 26, suggests that the UK labor market may be approaching a turning point, supported by rising starting salaries and improving hiring sentiment.