Improved market confidence leads to strongest rise in permanent placements for over a year.

The latest KPMG and REC, UK Report on Jobs has found January marked the first back-to-back increase in permanent staff appointments for over a year. This movement came amid reports of firmer market confidence. At the same time, however, billings received from the employment of temporary staff fell slightly for the first time since early 2013. Vacancy trends also highlighted strengthening demand for permanent workers, while temp vacancy growth steadied.

Concerns over the outlook and an already low unemployment rate continued to weigh on the supply of workers during the month. Data shows further steep reductions in both permanent and temporary candidate numbers, with the former noting the quicker rate of decline. Pay pressures were meanwhile relatively subdued, with permanent starting salaries rising at the softest pace for three-and-a-half years.

The report is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

Permanent placement growth picks up in January

UK recruiters signalled a further increase in permanent staff appointments in January amid reports of improved business confidence following the general election. Though modest, the rate of growth was the quickest recorded for just over a year. In contrast, temp billings fell for the first time since April 2013, with a number of recruiters blaming this on upcoming changes to IR35 legislation.

Permanent Placements / Temporary Billings

The total number of staff vacancies across the UK rose at the quickest pace for ten months in January, with growth largely driven by improved demand for permanent workers. Notably, permanent staff vacancies expanded at the steepest rate since last March, while growth of demand for short-term workers was unchanged from December.

Latest data signalled softer increases in starting pay for both permanent and temporary workers in January. Though solid, the latest upturn in permanent starting salaries was the slowest seen for three-and-a-half years. Temp wage inflation was meanwhile among the softest recorded since late-2016.

Slower rises in starting pay occurred despite further sharp falls in candidate supplies. Although the drop in permanent worker availability eased slightly at the start of 2020, the reduction in temp staff numbers the most marked seen since last June.

“Following the UK exit of the EU, there are promising signs that the UK jobs market is finally on the up with the strongest rise in permanent places for over a year – good news for job hunters,” said James Stewart, vice chair at KPMG. “However, with regulatory and trade negotiations all to play for, there is still a long way to go for a deal to be struck and businesses to have the clarity they need.

“Brexit is unchartered territory so the reality is the uncertainty will linger, but key investment decisions on hiring need to be made to build confidence and help get the UK back on the path to growth,” he added.

Neil Carberry, Recruitment & Employment Confederation chief executive, said: “It’s good to see that businesses have grown in confidence over the past two months and taken the opportunity to restart hiring. Permanent placements are up again, and demand for staff has risen at the quickest rate for ten months. This is good news for employers, recruiters and candidates – all three can now get on with making the economy flourish in 2020.”

However, Carberry also sounded a warning note: “The upcoming IR35 reforms are having a negative impact on the availability and placement of temporary workers,” he said. “It is vital that people pay the right amount of tax and that the system is fair, but for both of those things to happen we think the government needs to pause and think again on how IR35 changes. The temporary labour market is being stifled, and that’s not good for employers or our economy.”