The latest KPMG and REC, UK Report on Jobs: London survey indicated a further drop in recruitment activity as the first half of the year concluded.
The subdued economic climate dissuaded clients from taking on additional staff. Furthermore, the general election meant that some businesses decided to postpone their hiring decisions.
Demand for both permanent and temporary workers continued to deteriorate across the capital, and instead, businesses focused on trimming back their workforce numbers. As a result, staff availability continued to rise in June, and at accelerated rates.
Despite candidate availability rising, firms struggled to find suitable workers. In order to attract the right skill set, firms further raised their offerings. Both permanent starting salaries and temporary wages rose at faster rates. The uptick in pay was also in part influenced by the rising cost of living.
The KPMG and REC, UK Report on Jobs: London is compiled by S&P Global from responses to questionnaires sent to around 100 recruitment and employment consultancies in London.
Downturn in permanent placements gathers pace
June data indicated a fall in permanent placements in London, thereby extending the current run of decrease to 21 months. Though softer than the average recorded over the aforementioned sequence, the rate of decrease quickened to a three-month high and was solid overall. According to anecdotal evidence, a market slowdown and the general election dissuaded firms from hiring.
The downturn in permanent placements also deepened at the UK level and continued to outpace that observed in the capital. Moreover, a fresh fall in the Midlands meant that all four of the English tracked regions recorded a drop in permanent staff appointments in June.
While the rate at which temp billings fell across London in June was the weakest recorded in the current six-month sequence of decline, recruiters nonetheless recorded a sharp fall. The downturn was attributed to contracts nearing completion and subdued market conditions.
Alongside London, the South of England was the only other monitored English region where billings received from temp workers fell, though it was the former that posted a sharper reduction. Additionally, the downturn across the two areas went against the wider UK-trend, where a fresh, albeit marginal increase was noted for the first time in eight months.
Permanent vacancies fell across London for the sixteenth successive month in June. The rate of contraction was solid overall, quickening from May’s 14-month low and outpacing the UK-wide average. Of the four monitored English regions, the North of England went against the broader trend by registering a further uptick in permanent vacancies.
Demand for temp workers across London also deteriorated during June. The rate at which temp vacancies fell was largely in line with May’s recent high. The South of England was the only other tracked English region which recorded a fall in temp vacancies. Meanwhile, demand for temporary staff continued to improve in the Midlands and the North of England.
Permanent staff supply expands again in June
Recruiters based in London noted a rise in permanent staff availability in June. The respective seasonally adjusted index has now posted in expansion territory for over a year-and-a-half, with the latest reading indicating a marked and quicker rise. The upturn was largely fuelled by reports of redundancies.
Of the four monitored regions, only the Midlands surpassed London by recording the strongest expansion in the availability of permanent candidates. At the other end of the scale, the South of England saw the softest rise, but one that was still sharp nonetheless.
The latest survey data pointed to a rapid rise in the availability of temporary candidates across London. The rate of expansion quickened from May and was stronger than the UK-wide average. Survey respondents frequently mentioned redundancies and fewer contract roles.
Bar the South of England, which in fact registered the strongest rise in the supply of temp candidates, all the remaining three monitored English regions saw growth in temp candidates quicken since May.
Notable uptick in permanent starting salary growth
After easing to a more than three-year low in March, the rate at which permanent starting salaries increased across the capital continued to gather pace in June. Permanent salaries were raised sharply and at the greatest extent since November 2023. Recruiters often commented on a lack of suitably skilled candidates, as well as the rising cost of living.
Of the four monitored regions, London recorded the strongest rise in permanent salaries. Meanwhile, the South of England saw the weakest uptick.
Hourly wages for temporary and contract staff continued to rise across London during June, thereby extending the current run of wage inflation which began in March 2021. The rate of increase was the joint-highest in nine months and was above the average recorded at the UK level.
Moreover, London was the only monitored region where the rate of wage inflation accelerated on the month.
Anna Purchas, Senior Partner for KPMG’s London office said, “Despite a rise in candidates, partly due to businesses keeping a close eye on their budgets, employers are still struggling to find people with the skills they need to fill essential roles, and as a result are having to increase salaries to secure the best candidates.
“With the General Election now out of the way and a new Government coming together, providing more certainty on the political path ahead, improving skills and attracting highly skilled workers to London must be a priority.
“Employers in the capital continue to take a very cautious approach to recruitment, making only essential hires, as the economy continues its sluggish path. As the engine room for economic growth, will London employers now take their foot off the recruitment brakes and look to start executing those investment and growth plans?”
Neil Carberry, REC Chief Executive, said, “Recruiters report companies delayed some permanent hiring decisions during the election campaign. Now a new government has been elected, recruitment firms are looking for that investment to be unlocked.
“The rate at which temp billings fell across London in June was the weakest for six-months and suggests the gentle improvement in the UK of the last few months is still with us despite the political noise. As policy uncertainty abates, and interest rates drop, we expect permanent hirers to return to the market this summer.
“The incoming government has been clear that growth and prosperity will be their core goal. But only business can deliver this for them – a partnership is necessary.
“Working with business to make sure the new deal for workers is delivered in a way that businesses can adopt, and which supports the agility workers and employers need, is key. As is reforming the flawed Apprenticeship Levy. There can be no successful industrial strategy that does not have a stable workforce strategy at its heart.”
