The latest KPMG and REC, UK Report on Jobs: London survey indicated a worsening picture across the capital in August, as permanent placements fell following a first uptick in 22 months during July.
Meanwhile, temp billings were reduced at a sustained and strong pace.
Demand for workers also showed signs of weakness midway through the third quarter, with a fresh, albeit fractional drop in permanent vacancies reversing growth seen in the previous survey period. Demand for short-term workers, meanwhile, stagnated on the month.
The downturn in hiring activity was accompanied by a cooldown in inflation of permanent new salaries, which eased to a five-month low. Furthermore, hourly wages offered to temp workers fell for the first time in three-and-a-half years.
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.
Fresh and sharp drop in permanent placements
Following a brief respite in July, August data revealed a renewed and sharp fall in permanent placements across the capital. The rate of decrease was the most pronounced since March. The decline in new staff appointments was attributed to a lack of suitable candidates and fewer vacancies.
The fresh fall in permanent placements across London meant that all four monitored English regions recorded a drop during August.
An eighth consecutive monthly drop in billings received from temporary roles was recorded across London in August. The rate of decline was the second-weakest in the aforementioned sequence, only slightly quicker than seen in July, but nonetheless indicated a solid fall.
Alongside London, the South of England was the only other region of the four tracked to record a drop in temp billings in August. Meanwhile, the Midlands and the North of England recorded further upticks, with the former leading the upturn.
August data pointed to muted demand for labour across London. Permanent vacancies fell following a modest uptick in July, with contractions noted in 17 of the last 18 survey periods. Of the four monitored English regions, only the North of England bucked the wider trend by recording a rise in permanent vacancies.
Similarly, temp vacancies rose fractionally across London in July, but demand stagnated during the latest survey period. Meanwhile, the South of England was again the only monitored English region to record a drop in temporary vacancies.
Marked expansion in permanent staff supply
Permanent staff supply continued to expand across the capital during August. The rate of growth, while easing to a three-month low, was rapid overall and the second-strongest of the four monitored English regions. Recruiters noted that redundancies and a surge of senior candidates drove up supply.
The South of England was the only region to surpass London by registering the strongest uptick in permanent candidate availability and was also the only region to record stronger growth than in July.
A marked rise in temp staff supply was recorded across London during August, thereby extending the current run of growth to 20 months. The rate of expansion ticked up to a four-month high and was the strongest of the four tracked English regions for the second month running. According to anecdotal evidence, full-time workers looking to add a part-time job to supplement their income was said to have partly driven up the availability of short-term staff.
Bar the North of England, all the remaining English regions recorded stronger upticks in temp staff supply during August.
Permanent salary growth eases notably
Salaries for permanent new joiners continued to rise sharply across the capital during August, thereby extending the run of increase that began in March 2021. Recruiters noted that businesses drove up their pay in order to secure suitably-skilled workers. That said, the rate of inflation eased to a five-month low and measured below the long-run average.
Salaries across the UK as a whole for permanent new joiners rose at a broadly similar rate as observed in London.
For the first time in three-and-a-half years, temp wages for short-term workers fell across the capital in August. The rate of decrease was fractional overall. London and the South of England were the only two regions to record a fall in hourly pay rates. Meanwhile, the North of England and Midlands recorded cooler rates of increases.
Comments
Commenting on the latest survey results, Anna Purchas, Senior Partner for KPMG’s London office, said:
“While summer months can see a pause in some hiring, the employment market in London took a step back in August with both permanent and temporary hiring slowing down, and a cooldown in starting salary inflation, particularly for temporary workers where hourly wages fell for the first time in three-and-a-half years.
“Although we are starting to see slow improvements in the economic environment, employers in the capital continue to take a very cautious approach to recruitment, hiring for only those key roles and taking advantage of the growing candidate pool and falling starting salaries.
“As the holiday season ends and the country begins to look towards the Budget, hopefully September creates the business confidence and employment opportunities needed to kick start employers into pushing ahead with growth and investment plans that have been on hold for some time.”
Neil Carberry, REC Chief Executive, said, “August is always a difficult market to judge because of the summer break, but this month’s survey supports what we have been hearing around the country – employers are still cautious.
“They are waiting for a clear signal that sustained demand is around the corner. The new government said growth was its main priority – but it needs to deliver now. A vision for a positive, prosperous Britain has to accompany the fiscal realism that is being served up right now. That is the test for the Chancellor and Prime Minister this autumn.”
“It’s clear that there is underlying momentum in our jobs market despite bumps in the road, with the drop in temp billings modest in London and the fall in permanent placements across London mirroring the rest of the UK.
“The rate of permanent starting pay eased to a five-month low in London, which should reassure the Bank that the positive signal of beginning to cut interest rates was the right call. Firms will welcome this – but they are concerned by the potential challenges of the government’s labour market agenda.
“Big changes are possible – but moving too fast and breaking things may damage business investment and opportunities for workers. That is why we are encouraging the government to work with business to design changes that employers can work within, and to reassure them that they aren’t taking risks by hiring now.
“More than anything, as our new ‘Voice of the worker’ campaign shows, people want to work in a myriad of different ways now – any legal changes must support that, rather than prescribing what approved work is from Whitehall.”
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