Permanent placements rise at quickest rate for 14 months as demand for staff continues to improve.

Report on Jobs released.

The latest KPMG and REC, UK Report on Jobs survey signalled a stronger rise in permanent placements during February, but temp billings continued to fall largely due to upcoming IR35 legislation changes. Nonetheless, total demand for staff expanded at the quickest rate for over a year, which was often linked to a sustained improvement in market confidence since last year’s general election. At the same time, the overall supply of candidates fell at the weakest rate since June 2013, with some recruiters mentioning that people were more willing to seek out new roles.

Starting pay for permanent staff rose at a quicker pace amid greater competition for workers. However, temp wage inflation softened to a 40-month low.

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

The number of people placed into permanent job roles rose again during February, and at the quickest rate for 14 months. Recruiters linked the upturn to a sustained improvement in market confidence following last year’s general election. At the same time, there was a slight fall in temp billings for the second month running, which was often blamed on the upcoming private sector IR35 rollout.

February data signalled a sharp and accelerated rise in demand for staff, with the rate of vacancy growth the quickest for just over one year. The stronger increase was supported by firmer demand for both permanent and short-term staff, with the former noting the quicker rate of expansion. The overall drop in candidate supply was the weakest recorded since June 2013 in February. Recruiters commented that improved confidence among workers and upcoming changes to IR35 legislation had both contributed to the slower decline in candidate numbers.

Greater demand for workers and a lack of suitably skilled candidates led to a further rise in permanent starting salaries. Furthermore, the rate of inflation was the sharpest recorded since June 2019. Meanwhile, average hourly rates of pay for temp workers rose at a slower, but still solid, pace.

“The upturn in the UK jobs market remains steady, evidenced by a further rise in the number of people placed into permanent job roles and at the quickest rate in 14 months,” said James Stewart, Vice Chair at KPMG. “However, looking ahead, the current big unknown is the impact and influence the coronavirus may have on market confidence, let alone the lingering uncertainty around the actual Brexit deal.

“Businesses will be hoping that next week’s Budget provides some relief and investment to help get the UK back on the path to growth,” he said.

Neil Carberry, Recruitment & Employment Confederation chief executive, added: “It’s great to see how the state of the jobs market has improved in the past few months. Businesses are feeling positive, placement numbers are up, and the number of vacancies is now rising at the quickest pace for over a year. It shows just how important stability can be. With a little confidence about where the economy is heading, employers can make clear plans for hiring and put them into practice. Politicians must be careful to maintain that stability – whether that’s in negotiations with the EU, or making sure that the tax and skills policies in next week’s Budget work for business. This is even more important given the impact that coronavirus may have on the economy in the spring.

“The stark outlier in this data is the much slower performance of the temporary market,” Carberry added. “With less than a month to go until the IR35 changes kick in, we’re hearing about more and more companies putting a blanket ban on hiring contractors – and we now see this influencing the availability of flexible workers too. The government urgently needs to stop and think about how to make these changes more effective. They should start by delaying implementation in order to properly regulate umbrella companies.”

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