Bad news for jobs in the UK
Recruitment activity across the UK continued to fall sharply at the start of the third quarter, according to the latest KPMG and REC UK Report on Jobs survey, compiled by S&P Global.
The latest reductions in permanent placements and temp billings were often linked to weak employer confidence regarding the economic outlook and increased pressure on recruitment budgets.
Concurrently, the survey signalled a further steep reduction in overall vacancies that was the quickest since April. The availability of staff meanwhile rose at a substantial pace that was among the quickest since the survey began in 1997, which was often attributed to redundancies and worries over current job security.
Improvements in candidate numbers and increased budget constraints dampened pay growth. Notably, starting salaries rose at the weakest rate in nearly four and a half years.
A drop in jobs and salaries
The KPMG/REC Report on Jobs survey signalled a further steep decline in permanent staff appointments during July.
Recruiters frequently mentioned that hiring activity had fallen due to weak confidence around the economic outlook and greater pressure on budgets due to recent increases in payroll costs. These factors also drove the quickest reduction in temp billings for five months.
Notably, starting salary inflation slowed for the second month in a row in July, falling to its lowest level since March 2021.
While there were reports of some companies offering greater salaries for highly skilled candidates, other panellists commented that lower demand for staff, greater candidate availability and concerns around costs had weighed on growth. Temp pay inflation also softened, with wages expanding at a marginal pace that was the weakest in five months.
The overall availability of staff increased further at the start of the third quarter. Furthermore, the rate of expansion softened only slightly from June and was the second-sharpest since December 2020.
Redundancies, as well as concerns over job security, were reported as key drivers of growth. Permanent staff supply increased at a quicker pace than for temporary workers, but both rose markedly overall.
Decreasing demand
As has been the case since November 2023, demand for staff fell during July. Notably, the rate of decline was the most pronounced in three months and rapid overall.
Underlying data indicated that permanent vacancies fell at the quickest pace since February, while demand for temp workers dropped at the steepest rate since April.
“The labour market cooled in July as chief execs held back from increasing their recruitment budgets. Economic uncertainty, the complexities of AI adoption and global headwinds are all weighing on business planning,” said Jon Holt (Group Chief Executive and UK Senior Partner KPMG).
“A larger talent pool has helped temper wage inflation, which helped convince the Bank of England to cut interest rates. While UK plc remains resilient, a further loosening of monetary policy could help boost business confidence. But many firms will continue to pause major investment decisions until there is greater clarity in the Autumn,” he said.
This was echoed by Kate Shoesmith (REC Deputy Chief Executive), who noted that there is a path to jobs market recovery – but it will take coordinated action from the government, the Bank of England and business to maximise on any potential upswing.
“With starting salaries and temp pay rising only modestly, it was right to cut interest rates last week. More action like this, to stabilise the business cost base, is what will support growth and boost the jobs market this year. That is what the Chancellor should be keeping firmly in mind when preparing this year’s Autumn Budget,” she said.
“Fluctuations in permanent and temporary job placements signal a labour market that remains resilient but uneven. Construction, a key economic bellwether, has seen a rise in temp vacancies, an early sign of confidence returning. Demand for blue-collar temp roles and permanent engineering jobs also remains steady, offering another glimmer of optimism.”
