Next month’s Spending Review must start to unlock hiring and investing – or risk writing off increased growth in 2025

Employer sentiment after the Spring Statement 2025 remained subdued, according to new survey results from the Recruitment and Employment Confederation (REC) and Whitestone Insight.

Despite government efforts to signal stability and growth, many businesses remain evidently concerned about rising employment taxes, increased minimum wage rates, and reduced flexibility under the proposed Employment Rights Bill.

A survey of the same group of employers was undertaken immediately after the 26 March 2025 Spring Statement, which the government said would ‘build on the Autumn Budget [2024] and on decisions taken since, aimed at delivering stability to the British economy and kickstarting economic growth’. And much of employers’ forecasts for the rest of 2025 in the survey were actually worse after the Chancellor’s Spring Statement 2025 than before it.

Employers will hope that the upcoming Spending Review next month (June 2025) and the Autumn Budget later this year will provide meaningful incentives to support hiring and investment.

REC Deputy Chief Executive Kate Shoesmith said:

“We are seeing early green shoots in the economy, with some modest improvements in business sentiment, but our survey suggests many firms may still hold back until there is clearer and sustained action on economic policy.

“This Spending Review is a chance to hit reset and drive a bold, joined-up strategy for long-term economic growth – one that enables employers and work seekers to tap the full potential of today’s labour market. A critical test of the Spending Review and the Autumn Budget are whether they will lead to more optimistic forecast hiring and investing from employers, and greater belief that we are on a long-term path to growth.

“Government must support and enhance businesses in the UK by offering clarity on the industrial strategy and the role of the labour market to underpin growth across all sectors. More certainty on where government investment will focus and how businesses can work in partnership with government to support people into work will help. Right now, investment to drive growth by industry has been curtailed by increases in Employer National Insurance Contributions. Government certainly cannot take the resilience of the labour market for granted with more costs to doing business and instead need to provide stimulus to invest.

“A quarter of respondents in our survey report that skills shortages and lack of qualified candidates are and will likely continue to sit among their biggest challenges this year, reflecting the warning in our 2022 Overcoming Shortages report. The report said that a labour market restricted by skills and labour shortages could cost the UK economy up to £39 billion every year.”

For example, in the survey, a total of 41.4% of employers said the increased cost of employing people was among the biggest challenge they faced in attracting and retaining talent in Q1 (January – March) 2025. Yet 50% of surveyed employers said the increased cost of employing people will be their biggest challenge in attracting and retaining talent in the next six to nine months, particularly in light of the announcements in the Spring Statement 2025.

A total of 32.6% of respondents said economic uncertainty influencing hiring strategies and decisions was among their biggest challenge in attracting and retaining talent in Q1 2025. And 35.8% of respondents said economic uncertainty influencing hiring strategies and decisions are the biggest challenges in the next six to nine months, particularly in light of the announcements in the Spring Statement 2025.

And 26.1% of respondents said skill shortages and lack of qualified candidates for key roles was among their biggest challenge in attracting and retaining talent in Q1 2025. But when asked what they  expect as the biggest challenges in the next six to nine months in attracting and retaining talent, particularly in light of the announcements in the Spring Statement 2025, 28.9% said skill shortages and lack of qualified candidates for key roles.

Notes to editors

1.     The online survey of 234 employers in the UK of different sizes, locations and both private and public sectors, was undertaken by Whitestone Insight between 7 April - 22 April 2025. The same 234 employers were asked the two questions below:

2.     Among the suggestions for the government within the REC’s Spending Review 2025 submission:

• Fund pilot programmes to embed recruitment industry expertise into job centres, enhancing job matching and employability support.
• Promote temporary and flexible work to support diverse workforce participation.
• Accelerate investment in public transport and childcare to remove barriers to employment and increase workforce participation.
• Create a fair, stable, and competitive tax system by simplifying tax rules, maintaining a 25% Corporation Tax rate, extending business rate relief to recruitment firms, and strengthening regulations on umbrella companies to prevent tax avoidance while protecting workers and legitimate businesses.
• Reform the Growth and Skills Levy to include short-term training programs, ensuring temporary and flexible workers have access to upskilling opportunities that drive productivity and business growth.
• Reduce the costs of work visas, extend visa durations, and conduct regular immigration salary list reviews to ensure the UK remains an attractive destination for skilled workers and effectively addresses labour shortages.
• The government should engage with the REC to facilitate Government accredited digital ID - alongside those from other issuers - to be securely carried in citizen's digital wallets. This will speed up right to work checks making employment faster and save costs for repeated checks by employers – including the public sector.

3.     Overcoming shortages - How to create a sustainable labour market, REC, July 2022.

In this report, we show exactly how much damage could be done if we don’t step up. With a 10% surge in demand for staff across the economy, and the labour market restricted by shortages, we could see a 1.2% fall in expected GDP and productivity by 2027 – costing the economy anywhere between £30 billion and £39 billion every year. This figure is just short of the entire current defence budget, or two whole Elizabeth Lines.