Report on Jobs

Permanent staff recruitment falls sharply in January

Permanent staff appointments fell sharply in January, after a mild upturn in December, according to the latest KPMG and REC, UK Report on Jobs survey. The reduction was driven by the reintroduction of national lockdown measures amid a rise in coronavirus disease 2019 (COVID-19) cases. At the same time, greater uncertainty over the outlook drove a further marked increase in temp billings.

The resurgence of the virus also led to a renewed fall in demand for permanent staff, while growth in short-term vacancies moderated. Pay trends meanwhile weakened, with recruiters registering mild reductions in starting salaries and temp wages. Reports of redundancies related to COVID-19 led to a sustained increase in staff availability. However, the upturn was the softest seen for ten months, with recruiters indicating that a number of workers were reluctant to move roles in the current economic climate.

Permanent placements fall, but temp billings continue to rise

A third national lockdown amid a rise in COVID-19 cases, and a subsequent drop in market confidence, led to a renewed contraction in permanent staff placements during January. The rate of decline was the steepest seen since last June, albeit not as severe as those seen during the first lockdown. At the same time, greater uncertainty led to a further increase in the use of short-term staff, with temp billings rising strongly overall.

January sees fresh decline in overall vacancies

Latest survey data also revealed a fall in overall demand for workers at the start of the year, after a slight increase in December. The reduction was driven by a marked decline in demand for permanent staff, as temporary vacancies expanded modestly.

The supply of candidates rose solidly in January, despite the rate of increase easing to a ten-month low. The slowdown was driven by softer expansions in both permanent and temporary candidate numbers. Recruiters frequently mentioned that redundancies had pushed up staff supply. However, there were also reports that greater uncertainty over the outlook had weighed on candidates’ appetite for new roles.

Renewed fall in starting pay

Recruitment consultancies signalled renewed downward pressure on pay in January, as both starting salaries and temporary wages fell after increasing in December. That said, the rates of reduction were mild compared to those seen in 2020.

Data broken down by region indicated that permanent staff appointments fell across all four English regions monitored by the survey. Rates of decline were marked across the board, with the Midlands noting the steepest contraction.

Temp billings expanded across all four monitored English regions bar London. The Midlands registered the quickest upturn overall.

Demand for permanent staff declined across both the private and public sectors during January, with the latter registering the steeper rate of contraction. Temporary staff vacancies rose further in the private sector, albeit to a much weaker extent than in December, and were broadly stable in the public sector.

“Economic uncertainty is weighing on employers’ minds even where they see potential for their own firm to grow, so it’s no surprise that temporary work is leading the jobs recovery,” said Neil Carberry, chief executive of the REC. “This emphasises again how important flexible forms of work are to helping businesses and public services react to the pandemic. Temporary work is also helping people get back into jobs more quickly after the recent spike in redundancy numbers.

“With the vaccination programme making progress,” he continued. “It’s likely that a path out of the pandemic is emerging. As that happens, we expect a strong recovery in permanent hiring. But businesses need government help to bridge these last few months. Support for strained corporate cash flows is key. Extending furlough and reducing its cost to firms, supporting family business directors left out of support packages so far, and putting back repayments of deferred VAT and CBILs loans until the recovery would all help enormously.”

James Stewart, Vice Chair at KPMG, added:“The latest national lockdown has knocked business confidence, evident by a renewed drop in permanent appointments as businesses put recruitment on hold.

“There has been an uptick in short-term vacancies, but these are mainly in blue collar and the medical response industry, indicating that they are filling a temporary need for staff rather than pointing to long-term job opportunities.

“However, there is cause for optimism as businesses carefully monitor the vaccine rollout and look forward to the Budget next month,” he said. “It gives the government the opportunity to further help the recovery in jobs and revive the UK’s productivity growth.”

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

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