Home Business News Lockdown drives permanent placements down sharply in January

Lockdown drives permanent placements down sharply in January

by LLB Reporter
8th Feb 21 8:35 am

The latest KPMG and REC, UK Report on Jobs survey pointed to a marked decline in permanent staff appointments in London, and across the UK, due to the new national lockdown in January. Permanent placements fell at the sharpest rate for three months, as increased uncertainty drove a steep drop in demand for staff. Hesitancy towards switching jobs meanwhile led to a slower rise in candidate availability for both permanent and temporary roles, despite still frequent reports of staff redundancies. On a positive note, increased demand for temp staff in sectors including healthcare and cleaning meant temporary billings near-stabilised in January.

The London report is compiled by IHS Markit from responses to questionnaires sent to around 100 recruitment and employment consultancies in the capital.

Permanent placements fall at accelerated rate

Permanent staff appointments in London fell at a sharp and accelerated pace at the start of 2021. The capital recorded a similar trend to that seen across the UK as a whole, as the country was placed under stricter lockdown measures to curb the spread of the coronavirus disease 2019 (COVID-19) virus. Recruiters often noted a pause on hiring activity due to the new restrictions.

Notably though, the reduction in permanent placements in London was softer than those seen between March and July 2020 during the first national lockdown, and far slower than the nadir last April. All four monitored English regions recorded falls in January, with the Midlands seeing the quickest decrease in permanent staff appointments.

Despite a drop in temp hires in many parts of London due to the national lockdown, temporary billings moved closer to stabilisation in January. The respective seasonally adjusted index rose to a 13-month high, and was only fractionally below the 50.0 no-change mark. Panellists that saw an improvement linked this to a rise in demand for temporary workers in sectors such as healthcare and cleaning.

That said, London compared unfavourably against the national average, which recorded a sharp rise in temp billings since December. The Midlands led growth across the monitored English areas for the fourth time in five months.

The number of permanent vacancies in London continued to fall in January, extending the current run of decline to 11 months. Moreover, the rate of reduction quickened from December and was sharp. The UK as a whole saw a renewed and marked fall in permanent job positions, after having broadly stabilised in December. Temp roles in London, meanwhile, fell back into decline, after rising at the strongest rate for 16 months in the previous survey period. This contrasted with a modest rise in UK-wide temp vacancies.

Permanent staff supply growth slows considerably

Adjusted for seasonal influences, the London Permanent Staff Availability Index fell for the fifth consecutive month in January, pointing to a slower, but still strong, rise in permanent candidate numbers. In fact, the 9.4-point drop in the index was almost the sharpest on record (behind January 2019). According to recruiters, employed staff were cautious about switching jobs due to the lockdown, although high levels of redundancies meant that staff supply continued to increase overall. All four monitored English regions saw a rise in permanent staff availability, although the rate of growth in the North of England was only marginal.

The rate of temporary worker supply growth in London softened in the new year, with the latest rise the weakest recorded since March 2020. That said, the data signalled a sharp increase in people looking for temporary jobs overall, again largely due to redundancies. For the seventh month in a row, the pace of growth in London was faster than the UK average. Notably, the Midlands saw the first reduction in temp candidate numbers for ten months.

Starting salaries fall steeply amid weaker hiring

Salaries offered to new permanent staff in London decreased for the tenth consecutive month during January. The pace of decline quickened markedly from December and was sharp. Recruiters mainly attributed the fall in salaries to a drop in demand for permanent staff, in turn linked to the national lockdown. Some respondents also mentioned that successful candidates often accepted lower salaries. The rate of reduction was stronger than the UK trend, and quicker than those seen in the remaining three monitored English areas.

Recruiters in London signalled a further decline in wages for newly placed temp workers in January, which was often linked to COVID-19 and IR35 regulation. The seasonally adjusted Temporary Wages Index fell from December, to signal a sharp reduction in temp pay that was broadly in line with the average recorded in 2020. Latest data also indicated a renewed fall in temp wages nationwide, albeit only marginal, and driven solely by the reduction seen in the capital.

Commenting on the latest survey results, Anna Purchas, Senior Partner for KPMG in London said, “In what is traditionally a busy month for recruiters in London, the lockdown has put everything on hold as both jobseekers and employers hold their breath to see how the COVID-19 crisis plays out. London has now seen 11 months of decline in the number of permanent vacancies available in the UK’s economic powerhouse.

“London businesses will be carefully monitoring the vaccine rollout and announcements in the Budget next month. It gives the Government the opportunity to further help the recovery in jobs and revive the UK’s productivity growth.”

Neil Carberry, Chief Executive of the Recruitment & Employment Confederation added, “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. 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, 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.”

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