The UK job market is experiencing significant challenges, with permanent job vacancies declining at the fastest rate since August 2020, according to the latest report from KPMG and the Recruitment and Employment Confederation (REC). The analysis shows that December marked the 14th consecutive month of declining vacancies. The fall is attributed to rising National Insurance contributions, which are set to increase by £25bn in April. The hike is causing many employers to hesitate when it comes to hiring. Despite these challenges, Jon Holt, KPMG’s group chief executive, noted that wage inflation is rising, suggesting ongoing demand for workers. “As 2025 progresses and UK economic growth picks up, businesses will need new talent. Salary inflation being at its steepest in four months shows they are still willing to compete for it,” he commented. Neil Carberry, chief executive of the REC, said: “December is always a hiring low point, and a new year brings new hope – with inflation under control, low unemployment and economic growth expected, the fundamentals are better than many appreciate.”

Major UK businesses, including Greggs, Iceland, National Highways and Balfour Beatty, are supporting a Government initiative to help offenders on probation secure stable employment. Led by Lord Timpson, the Prisons Minister, the scheme aims to enhance the probation service’s efforts by establishing employment councils across 11 regions in England and Wales. These councils will facilitate collaboration between local businesses, prisons, and probation officers, with the Department for Work and Pensions assisting in connecting offenders to job centres. Lord Timpson said: “Getting former offenders into stable work is a sure way of cutting crime and making our streets safer.”

Flexible working arrangements are being curtailed by several large employers as they enforce stricter office attendance policies. A September 2024 survey of 150 financial services companies by KPMG found that bosses were considering a range of methods to track attendance in the office, with some companies saying they would consider using monitoring devices to ensure employees were at work. As firms navigate these changes, the balance between office presence and employee satisfaction remains a critical issue. Employment lawyer David Palmer notes that while companies can mandate office attendance, they must consider reasonable adjustments for employees with disabilities.

Research by the UK Government indicates that workers in central Scotland will experience the most significant wage increases due to the Employment Rights Bill. Deputy Prime Minister Angela Rayner said: “This is a Government on the side of Scottish workers,” highlighting the bill as the “biggest upgrade to workers’ rights in a generation.” Approximately 100,000 low-paid employees will benefit from the ban on exploitative zero-hours contracts, which have doubled in prevalence since 2013. The bill aims to provide workers with contracts that reflect their usual hours and ensure reasonable notice for shift changes.

Inflationary pressures are likely to persist as firms increase prices in response to tax hikes set out in the Budget, according to a Bank of England poll of finance chiefs. December’s survey shows that expected price growth for the year ahead increased to 4%, with this up from 3.8% in November and the highest level since April. It was also shown that realised price growth in the year to December increased to 4%, up from 3.7% the month before. While realised annual wage growth dipped to 5.3% in December, expected wage growth for the coming year increased for the first time since July, hitting 3.9%. More than half (54%) of finance directors indicated plans to raise prices to counteract higher tax payments, while 64% expect profit margins to shrink. The survey also revealed that 53% of plan to lay off staff. Inflation remains a concern, with companies expecting to raise prices by an average of 4% and inflation projected to stay above the Bank’s 2% target.

Shop prices are expected to increase this year as businesses respond to rising costs due to measures set out in the Budget. The British Retail Consortium (BRC) forecasts an average food price rise of 4.2% in the latter half of 2025. Helen Dickinson, chief executive of the BRC, said: “As retailers battle the £7bn of increased costs in 2025 from the Budget, there is little hope of prices going anywhere but up.” Retailers have urged ministers to ease their tax burden, saying the cost of items in stores are likely to rise as companies grapple with higher employment costs. Meanwhile, a report from Grant Thornton shows that 54% of firms are contemplating price hikes due to the Budget.

Analysis by Innovate Finance shows that the UK’s fintech sector attracted $3.6bn (£2.9bn) of total funding in 2024, with this second only to the US and more than the next five European countries combined. While the data shows that global fintech investment fell 20% globally to $43.5bn (£35.2bn) last year, analysts are hoping to see a resurgence in the year ahead. Janine Hirt, CEO of Innovate Finance, said: “When we’ve been speaking with investors, they’re positive about 2025.” With the analysis showing that female-led fintechs saw a 78% decline in investment, Ms Hirt said: “It is a clear indication that we need to be doing more, because that is a hugely disappointing number, and we have to take action to try and increase that.”

In 2024, only 18 companies launched initial public offerings (IPOs) on the London Stock Exchange, marking the lowest number since at least 2010, according to data from EY. Meanwhile, 88 companies either delisted or moved their primary listings away from London, citing “declining liquidity and lower valuations compared to other markets” among reasons for their exit. Despite the significant drop in listings, total proceeds raised reached £3.4bn.

Abrdn, an investment company and asset manager, has predicted that Chancellor Rachel Reeves may have to hold a Budget in March to reevaluate Government spending and settle investors’ nerves. The warning came as UK government bond yields surged higher and the pound slumped. Matthew Amis, an investment manager at Abrdn, said the volatility showed “investors need confidence” to buy government debt otherwise “gilt yields will continue to move higher and the currency will continue to weaken.” Noting that a spending review is not due until June, he said: “That’s a long time for the market to speculate with confidence continuing to erode.” He added that Abrdn expects to see a Budget this spring, alongside Office for Budget Responsibility forecasts, where the Chancellor “signals greater cuts to Government spending.”

Bank of England rate-setter Sarah Breeden expects to back “gradual” interest rate cuts this year, saying that with inflation falling faster than expected in 2024, the Bank will be able to continue lowering borrowing costs. Ms Breeden, a member of the Monetary Policy Committee, said: “The recent evidence further supports the case to withdraw policy restrictiveness and I expect to continue to remove restrictiveness gradually over time.” Noting that she had been concerned that inflation might become “entrenched” due to strong demand in the economy, Ms Breeden added: “It is clear to me that the risk of that upside scenario has now subsided sufficiently to no longer be a core consideration in setting policy.” Financial markets expect the Bank to cut interest rates twice in 2025 amid lingering concerns about the persistence of inflation.

Experts at Oxford Economics predict that interest rates will fall to 2.5% by late 2027. This is far lower that market consensus, with most analysts suggesting that rates will fall to 3.75% by the end of 2025 and settle at around that level. Andrew Goodwin, chief UK economist at Oxford Economics, who says the economic research firm is anticipating lower inflation than financial markets are, says demographic changes are likely to play a part in delivering lower rates.

Elon Musk has claimed that artificial intelligence companies have “exhausted” the cumulative sum of human knowledge for training their models, suggesting they must now rely on “synthetic” data created by AI. While this shift is already being adopted by major tech firms like Meta, Microsoft, Google, and OpenAI, Mr Musk cautioned that the tendency of AI models to produce “hallucinations” poses risks to the reliability of synthetic data.