The UK labour market showed fresh signs of strain in July as employers cut back on recruitment plans and eased pay rises according to new industry surveys.

The Chartered Institute of Personnel and Development (CIPD) reported that only 57% of private sector employers intend to hire in the next three months, the lowest level since the pandemic and down from 58% earlier this year. Sectors such as hospitality and social care are among the most cautious, citing weaker demand and rising operating expenses.

Pay pressures also cooled sharply. Recruiters noted the slowest increase in starting salaries for permanent staff since March 2021 while temporary worker pay growth hit a five month low.

The slowdown is being linked to higher employment costs including increased national insurance contributions, a higher minimum wage, and expected changes to employment laws that could make it harder to dismiss staff.

A separate survey by KPMG and the Recruitment & Employment Confederation (REC) confirmed subdued hiring activity and sluggish pay growth, fuelling concerns over the health of the jobs market.

Economists warn that the combination of weak hiring intentions and slower pay growth could signal a broader cooling of the UK economy and potentially influence future decisions by the Bank of England on interest rates.