The latest KPMG and REC, UK Report on Jobs survey, compiled by S&P Global, highlighted that ongoing uncertainty around the economic outlook continued to impact hiring decisions at the start of the year.
Permanent placements fell at “a sharp and accelerated pace, while the downturn in temp billings remained mild.”
Overall vacancies meanwhile declined “slightly for the fourth time in five months.”
Lower levels of recruitment activity and redundancies fueled “further increases in staff availability.”
Though sharp, upturns in both permanent and temporary candidate numbers cooled from December, however. Competition for staff “with desirable skills and the rising cost of living underpinned further increases in starting pay, albeit with rates of salary and wage inflation both posting below their long-run trends.”
The report is compiled by S&P Global from responses “to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.”
Uncertainty over the outlook continues to constrain hiring
The latest survey of recruitment agencies “across the UK revealed a further drop in hiring activity at the start of 2024, particularly for permanent workers.”
Notably, permanent staff appointments fell “at a sharp and accelerated pace, while temp billings fell only slightly.”
There were frequent reports “that businesses had often paused recruitment plans due to the subdued economic environment, while fewer vacancies also dampened staff placements.”
Overall demand for workers falls for third month running
Total vacancies across the UK declined “again during January, albeit marginally. Demand for staff has now weakened in four of the past five months, driven by a sustained reduction in permanent job opportunities. Meanwhile, temp vacancies expanded at the slowest rate since November 2020 and only slightly.”
Permanent salary inflation slips to 34-month low…
Although starting salary inflation remained sharp in January, “the latest increase in pay was the softest recorded since March 2021 and slower than the series average.”
Temp wage growth quickened slightly “to a five-month high, but was also below the historical trend.”
According to recruiters, competition “for suitably-skilled staff amid a strong inflationary environment continued to push pay rates higher. However, there were also reports that pressure on client budgets had limited overall increases in pay.”
UK recruiters registered “a further sharp increase in overall candidate availability at the start of the year. This was despite the rate of growth easing to a four-month low. Permanent staff supply continued to rise at a slightly quicker pace than that seen for short-term workers, but both saw upturns ease since December. There were frequent reports that redundancies and a slowdown in recruitment activity had increased the pool of available workers.”
Jon Holt, Chief Executive and Senior Partner of KPMG in the UK, said:
“We’re starting the year with the labour market remaining tight overall, though we are seeing the number of job seekers increasing as demand softens. The skills gap is part of this story. We know the UK’s ambition is for technology to drive productivity and economic growth, and yet we still face a shortfall in skilled tech talent. If the UK is serious about equipping the workforce for a modern digital economy, we need Government and business working together and investing in reskilling and upskilling.”
As noted in the update:
“All eyes will now be on the Chancellor’s upcoming Budget, and while recruiters and businesses would no doubt welcome any further cuts in payroll tax costs, they will also be hoping for a bit of policy stability during an election year.”
Neil Carberry, REC Chief Executive, said:
“The labour market’s resilience is a great strength of the British economy – but it can’t last for ever without sustained economic growth. Pay has normalised, inflation is dropping and the hiring market has been cooling for a year now – it’s high time that the Bank of England starts releasing the brake pedal on our economy. The Chancellor has the perfect opportunity in the Spring Budget to give some clear signals on growth. A long-term plan to tackle skills and labour shortages, economic inactivity and weak productivity is essential. A Spring Budget full of practical steps on skills, welfare to work and the cost of doing business will help hugely.”