Priced out of work: Just one in seven firms is confident about hiring as employment costs soar under Labour

The rising cost of employment is holding back living standards and hitting job opportunities for the young, business leaders have warned.

In a damning report, the CBI said just 15 per cent of companies, or around one in seven, are confident about hiring new staff, down from 24 per cent a year ago.

The findings will fuel fears that jobseekers are being priced out of work.

Bosses blamed rising labour costs, which have been driven up by inflation-busting hikes to minimum wage rates and the £25billion national insurance tax raid on employers.

They also pointed to red tape stemming from Labour’s sweeping reforms to hand workers new rights at the expense of businesses.

The CBI’s survey found 73 per cent of employers cite labour costs as the biggest threat to job prospects with employment regulation second at 72 per cent.

The subsequent squeeze on hiring ‘rising being felt particularly strongly by young people as rising labour costs leave firms with less headroom to create entry-level roles’, the report said.

Chancellor John Healey has been urged to use this month's Budget to boost job prospects

Nearly two-thirds of businesses, or 65.3 per cent, say the UK has become a less attractive place to do business over the past five years.

CBI chief executive Rain Newton-Smith said: ‘Britain’s businesses want to invest, grow and create good jobs, but these findings are a clear signal that the cost and confidence equation in the labour market needs to change.

‘Higher employment costs and growing regulatory pressures are making firms more cautious about hiring and investment. That matters not just for businesses, but for living standards and particularly for young people trying to get their first foot on the career ladder.

‘The good news is that this is not irreversible. Government can use the upcoming Budget to rebuild confidence by giving firms greater certainty over future employment costs, ensuring regulation supports rather than inhibits hiring, and working with business to bring down the cost of creating jobs.

‘Get that balance right and firms will have more of the headroom they need to invest in people, raise wages and create the opportunities that will drive growth.’

Carmen Watson, chairman of recruitment firm Pertemps, which compiled the report with the CBI, said: ‘Across the employment market, businesses are becoming increasingly cautious about recruitment. Employers still want to grow and invest in their people, but rising employment costs, subdued demand and continued uncertainty are putting greater pressure on decisions around hiring, pay and workforce investment.

‘The consequences are being felt across the workforce and by jobseekers at every stage of their careers. When employers have less confidence and less headroom to recruit, opportunities narrow, pay progression becomes more difficult and investment in skills and training can suffer. 

'More than half of businesses say they are offering fewer apprenticeship opportunities than they would like, while 44 per cent feel pressure to prioritise more experienced hires. While this presents a particular challenge for those taking their first steps into work, the wider impact affects people of all ages looking for new opportunities, career progression, or the chance to develop new skills.

‘Businesses want to invest in their people and build the skills they need for the future, but confidence remains fragile. Creating the right balance between employment costs, regulation and practical support will be essential to giving employers the confidence and headroom to recruit, invest in skills and create meaningful, sustainable employment for people at every stage of their working lives.’

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