Prime Minister Keir Starmer began 2026 with a promise that Britons would soon "feel richer." But the data tells a different, darker story. Key business surveys released this morning reveal that the UK economy ended 2025 not with a bang, but with a shuddering halt in hiring and a collapse in corporate optimism.

The reports from KPMG, the Recruitment and Employment Confederation (REC), and accountancy firm BDO paint a grim picture. The "optimism index" has plummeted to its lowest level in nearly five years, contradicting the government's narrative of recovery. Businesses are battered by rising costs, high interest rates, and regulatory uncertainty, leading to a freeze in recruitment that threatens to push unemployment higher.

The Hiring Freeze

"The jobs market is signaling caution," warned Jon Holt, CEO of KPMG UK. The survey shows a sharp drop in both permanent and temporary appointments in December. Employers are hesitant to commit to new staff when their own margins are shrinking.

• The Cost of Doing Business: Scott Knight of BDO points to a "tipping point." Energy costs, while stabilizing, remain high compared to competitors in the US and Asia. Coupled with the new industrial strategy’s compliance costs, many firms are choosing to hoard cash rather than invest in people.
• The Disconnect: The data highlights a dangerous disconnect between Downing Street and the High Street. While the government touts the end of the two-child benefit cap and lower energy bills as wins, businesses see a lack of a clear growth roadmap. "We need decisive action on interest rates, not just speeches," Knight added.
• Manufacturing Anxiety: A separate survey by Make UK found that while manufacturers are hopeful about the new industrial strategy, they warn that investment plans are on the brink of being cancelled or shifted overseas due to the hostile cost environment.

Starmer's Challenge

The timing is politically toxic for Labour. Having promised "change," the government is now presiding over an economic stagnation that feels eerily similar to the previous administration's final days. If the hiring freeze turns into layoffs, the "feel good" factor Starmer promised will be replaced by the cold reality of a recession.