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Demand for new staff among businesses slumped to levels seen in 2020 in the wake of last month’s budget, according to a survey of major recruitment consultants.

A monthly report by the Recruitment and Employment Confederation (REC) trade body and accountants KPMG suggested that the tax raid on firms announced by chancellor Rachel Reeves on 30 October forced employers to “re-assess their hiring needs”.

Its index covering hiring intentions came in at its lowest level since August 2020.

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The findings chime with warnings from business groups and trade bodies in the wake of the budget that the measures would hurt investment, pay and employment.

The hike to higher employer National Insurance contributions and the National Living Wage could also be passed on to consumers in the form of higher prices, they warned.

The government argues the tax take is necessary to help put the public finances on a more stable footing.

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Ms Reeves will hope that the survey’s findings represent a one-off dip rather than the start of a longer downturn in the labour market.

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CBI chief’s approach to budget tax shock

She has prioritised help for working people as part of a growth-focused agenda covering Labour’s return to government, describing the measures as an essential one-off to rebuilding core public services.

REC chief executive Neil Carberry said of the report: “It should be a surprise to no one that firms took the time to re-assess their hiring needs in November after a tough budget for employers.

“The real question now is whether businesses will return to the market as they go into next year with greater certainty about the path ahead.”

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Chancellor confident despite low growth

The economy has slowed during the second half of the year though official figures covering October, released later this week, are tipped to show a return to tepid growth.

Bank of England governor Andrew Bailey has said that the reaction of business to the budget is the “biggest issue” facing Bank policymakers.

The uncertainty is clouding forecasts for growth in 2025.

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A survey by the Bank last week showed 54% of businesses would respond to the higher budget costs by reducing employment, while 38% expected lower wages.

Reeves has described the budget as a one-off to fix the public finances and pay for improved public services and has promised businesses stable and predictable tax policy to help them plan and invest.

However Jon Holt, group chief executive of KPMG UK, said expected interest rate cuts in 2025 and the government’s investment plans offered reasons for optimism.

“This should give businesses greater confidence which may help stabilise the labour market,” he said.

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Starmer vows to fight any plots to oust him – as Labour MPs fear major budget backlash

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Starmer vows to fight any plots to oust him - as Labour MPs fear major budget backlash

Sir Keir Starmer is vowing to fight any challenge to his leadership rather than stand aside, amid claims of plotting by MPs being compared to TV’s The Traitors.

Number 10 is going on the attack ahead of a difficult budget this month, with fears it could prove so unpopular that Labour MPs may move against Sir Keir.

But Sky News political editor Beth Rigby reports the prime minister “has no intention of giving way”, with allies warning any challenge would lead to a “drawn-out leadership election, spook the markets, and create more chaos that further damages the Labour brand”.

One senior figure told Rigby any move against Sir Keir would be more likely to arrive after next May’s elections, rather than the budget.

They said many Labour MPs could probably get behind measures like tax rises for wealthier workers, pensioners and landlords, as well as scrapping the two-child benefit cap, if that’s what the chancellor announces on 26 November.

But there are a series of potentially damaging elections in May, including in London and for the Senedd in Wales, as Labour face a challenge from Reform UK on the right and parties like the Greens and Plaid Cymru on the left.

Rigby said there is a “settled view among some very senior figures in the party that Starmer lacks the charisma and communication skills to take on Nigel Farage and win over the public, particularly if or when he breaks a bunch of manifesto pledges”.

Sir Keir and Rachel Reeves have refused to rule out breaking their manifesto promises not to raise income tax, national insurance, or VAT at the budget.

The Number 10 operation to ward off a challenge comes after Sky News deputy political editor Sam Coates likened the febrile mood in the Labour high command to the TV hit The Traitors.

Speaking on the Politics At Sam And Anne’s podcast, he said: “A minister got in touch at the start of the weekend to say they believe that there’s some quite substantial plotting going on.

“They say there was at least one cabinet minister telling colleagues that Keir Starmer, and I quote, is finished.”

We’ve been here before…


John Craig

Jon Craig

Chief political correspondent

@joncraig

When Boris Johnson was facing mutiny from Conservative MPs, his allies launched “Operation Save Big Dog”.

When Margaret Thatcher was about to be ousted by her rebellious MPs in 1990, she declared: “I fight on, I fight to win.”

And Harold Wilson, constantly paranoid about plots, famously quipped in 1969: “I know what’s going on. I’m going on.”

Boris Johnson was ousted less than six months after “Operation Save Big Dog”, Margaret Thatcher resigned the following morning after saying “I fight on”, and Harold Wilson lost a general election to Edward Heath a year after vowing that he would go on.

Just saying.

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Coates said the cabinet minister “absolutely and totally denies they are up to anything nefarious whatsoever”.

“I actually do think that this is all in the style of The Traitors, because I’m not sure that there is hard and fast evidence of plotting – there might be some hints from some quarters,” he added.

“But what seems to be completely logical is that if you’re a bit worried in Number 10, you’re trying to pitch roll and ward off people who are maybe thinking about the need to position themselves by starting to get out rumours of plots and hoping that the political system turns against them for disloyalty.”

Who is plotting to unseat the PM? Pic: PA
Image:
Who is plotting to unseat the PM? Pic: PA

Cloak-and-dagger

Reports emerged on Tuesday night in The Times, The Guardian, and from the BBC of a “bunker mode” in Number 10, “regime change”, and “plotting” to replace Sir Keir.

Responding to the reports, Health Secretary Wes Streeting denied he was seeking to oust the prime minister.

A spokesperson for Mr Streeting told Sky News: “These claims are categorically untrue.

“Wes’s focus has entirely been on cutting waiting lists for the first time in 15 years, recruiting 2,500 more GPs and rebuilding the NHS that saved his life.”

It's not me, insists Wes Streeting. Pic: Reuters
Image:
It’s not me, insists Wes Streeting. Pic: Reuters

However, there is clearly a co-coordinated campaign by allies of the increasingly unpopular Sir Keir to try to prevent a leadership challenge by a cabinet minister or stalking horse.

Sir Keir’s biographer Tom Baldwin questioned the logic of those briefing from within the corridors of power.

“I’m at a loss to understand why anyone would think this sort of briefing will help Keir Starmer, the government, or even their own cause,” he said on social media. “Some people just can’t resist, I guess, but it’s all a bit nuts.”

What next?

It comes ahead of Prime Minister’s Questions this lunchtime, handing Tory leader Kemi Badenoch the chance to make it an awkward afternoon for Sir Keir.

The health secretary will start his day on Sky News’ Morning With Ridge And Frost and will then speak at an NHS providers’ conference.

Watch and follow live coverage across Sky News – including in the Politics Hub.

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Government to reconsider whether to give compensation to Waspi women

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Government to reconsider whether to give compensation to Waspi women

A decision not to award compensation to the Waspi women will be reconsidered by the government because of undisclosed “evidence”, the Work and Pensions Secretary has said.

Waspi women – Women Against State Pensions Inequality – are those born in the 1950s who say they were not given sufficient warning of the state pension age for women being lifted – to be in line with men – from 60 to 65.

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They have long argued that this was done too quickly, leaving some women financially unprepared to cope with the number of years when they were no longer able to claim their state pension.

The government said in December that they would not be compensated, because most women knew the changes were coming.

Waspi campaigners at a protest in Westminster in October last year. Pic: PA
Image:
Waspi campaigners at a protest in Westminster in October last year. Pic: PA

But Pat McFadden told the Commons on Tuesday: “Since then, as part of the legal proceedings challenging the government’s decision, evidence has been cited about research findings from a 2007 report.”

The cabinet minister was referring to the rediscovery of a 2007 Department for Work and Pensions evaluation which had led to officials stopping sending automatic pension forecast letters out.

Mr McFadden said: “In light of this, and in the interest of fairness and transparency, I have concluded that the government should now consider this evidence. This means we will retake the decision made last December as it relates to the communications on State Pension age.”

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Around 3.6 million women were impacted by the change to the state pension age. The government has previously said compensating them could cost £10.5bn.

Mr McFadden stressed that reviewing the decision should not be taken as an indication that the government will “decide that it should award financial redress”.

Angela Madden, the chair of Waspi, said the decision was a “major step forward”.

“The government now knows it got it wrong, and we are pleased they are now trying to do it properly,” she said.

“The only correct thing to do is to immediately compensate the 3.6 million Waspi women who have already waited too long for justice.”

The decision to refuse compensation was made despite a recommendation by the Parliamentary and Health Service Ombudsman (PHSO) that the women should be paid up to £2,950 each.

The PHSO’s findings are not binding, and last year the then-work and pensions secretary Liz Kendall said that the cost could not be justified as most women knew about the changes.

Sir Keir Starmer also said compensation would “burden” the taxpayer.

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New law could help tackle AI-generated child abuse at source, says watchdog

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New law could help tackle AI-generated child abuse at source, says watchdog

Groups tackling AI-generated child sexual abuse material could be given more powers to protect children online under a proposed new law.

Organisations like the Internet Watch Foundation (IWF), as well as AI developers themselves, will be able to test the ability of AI models to create such content without breaking the law.

That would mean they could tackle the problem at the source, rather than having to wait for illegal content to appear before they deal with it, according to Kerry Smith, chief executive of the IWF.

The IWF deals with child abuse images online, removing hundreds of thousands every year.

Ms Smith called the proposed law a “vital step to make sure AI products are safe before they are released”.

An IWF analyst at work. Pic: IWF
Image:
An IWF analyst at work. Pic: IWF

How would the law work?

The changes are due to be tabled today as an amendment to the Crime and Policing Bill.

The government said designated bodies could include AI developers and child protection organisations, and it will bring in a group of experts to ensure testing is carried out “safely and securely”.

The new rules would also mean AI models can be checked to make sure they don’t produce extreme pornography or non-consensual intimate images.

“These new laws will ensure AI systems can be made safe at the source, preventing vulnerabilities that could put children at risk,” said Technology Secretary Liz Kendall.

“By empowering trusted organisations to scrutinise their AI models, we are ensuring child safety is designed into AI systems, not bolted on as an afterthought.”

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AI child abuse image-maker jailed

AI abuse material on the rise

The announcement came as new data was published by the IWF showing reports of AI-generated child sexual abuse material have more than doubled in the past year.

According to the data, the severity of material has intensified over that time.

The most serious category A content – images involving penetrative sexual activity, sexual activity with an animal, or sadism – has risen from 2,621 to 3,086 items, accounting for 56% of all illegal material, compared with 41% last year.

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The data showed girls have been most commonly targeted, accounting for 94% of illegal AI images in 2025.

The NSPCC called for the new laws to go further and make this kind of testing compulsory for AI companies.

“It’s encouraging to see new legislation that pushes the AI industry to take greater responsibility for scrutinising their models and preventing the creation of child sexual abuse material on their platforms,” said Rani Govender, policy manager for child safety online at the charity.

“But to make a real difference for children, this cannot be optional.

“Government must ensure that there is a mandatory duty for AI developers to use this provision so that safeguarding against child sexual abuse is an essential part of product design.”

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