Home Business Insights & Advice London employers continue to approach recruitment with caution

London employers continue to approach recruitment with caution

by LLB Reporter
8th Feb 23 11:36 am

Ongoing uncertainty around the economic outlook weighed on permanent staff hiring in the capital in January, according to the latest KPMG and REC, UK Report on Jobs: London survey.

Permanent placements fell for the fourth month running, albeit at a slower pace, while a preference for short-term workers drove a stronger rise in temp billings.

Concurrently, vacancy data showed only a fractional rise in the number of open permanent roles in the capital, while demand for temp staff rose at a quicker pace. In contrast to the national trend, staff availability across London improved at the start of the year amid reports of redundancies. Nevertheless, pay pressures remained historically strong due to shortages of skilled candidates and the rising cost of living.

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.

Modest drop in permanent staff appointments

January survey data signalled a further fall in permanent placements across London. Where permanent staff appointments declined, recruiters cited a more cautious approach to hiring among clients and limited candidate availability. However, the pace of contraction was the softest in the current four-month run of decrease and remained slower than the UK-wide average.

All four monitored English regions registered a drop in permanent staff appointments, with the quickest reduction seen in the Midlands.

For the third month running, temp billings increased across the capital during January. Moreover, the rate of expansion picked up to the sharpest seen since last August. According to recruiters, the upturn was due to firms moving away from permanent hires in favour of temp staff amid the weaker economic climate.

Temp billings growth also quickened across the UK as a whole, but remained softer than that seen in London. All four monitored English areas bar the Midlands saw higher temp billings in January, with the North of England leading the upturn.

Latest data showed that vacancies for permanent staff in London expanded in January, following a mild contraction in December. That said, the upturn was only fractional and weaker than the UK-wide trend.

Demand for temporary workers in the capital fared better at the start of the year, with the rate of vacancy growth accelerating to a four-month high. The expansion in temp staff demand also outpaced that seen at the national level.

Permanent staff supply rises at quickest rate since March 2021

The availability of permanent workers across London improved for the second month in a row during January. Furthermore, the rate of expansion was the quickest seen since March 2021 and solid overall. There were reports that redundancies had contributed to the latest rise in permanent candidate numbers.

Notably, London was the only monitored English region that reported growth in permanent staff supply during January.

The availability of workers to fill short-term positions in London increased for the first time in three months at the start of the year. That said, the rate of improvement was only modest overall. Recruiters mentioned that redundancies and the non-renewal of projects had been factors pushing up temp labour supply.

As was the case for permanent worker supply, London was the only monitored English region to see an increase in temp candidate availability.

Permanent starters’ salaries continue to rise sharply

Adjusted for seasonal factors, the Permanent Salaries Index pointed to a sustained rise in salaries awarded to newly-placed permanent staff in the capital during January. The rate of inflation quickened slightly on the month and remained sharp in the context of the survey history. Higher starting salaries were generally linked to candidate shortages and rising living costs. That said, the upturn was slightly weaker than the UK-wide trend and the average seen over 2022 as a whole.

On a regional basis, the steepest increase in starting salaries was seen in the North of England and the softest in the Midlands.

Recruiters based in London signalled an increase in average hourly rates of pay for temp staff in January, thereby stretching the current sequence of rising wages to 23 months. Though sharp and quicker than that seen in December, the rate of pay inflation was the softest seen of all four monitored English regions. Recruiters commented that rates of pay had increased to attract and secure scarce candidates.

Temp wages rose across all four monitored English regions at the start of the year, with the sharpest rate of inflation seen in the Midlands.

Commenting on the latest survey results, Anna Purchas, London Office Senior Partner at KPMG said, “London employers continue to approach recruitment with caution, with many choosing to hire temporary staff, as they wait to see how the economy performs in the coming months.

“Whilst many London businesses continue to have growth on their mind, rising starting salaries to fill vacancies are putting pressure on businesses already facing an ever growing cost environment.  However, this could start to subside as the capital bucks the UK trend, and more candidates make themselves available for work.

“The current jobs market in London remains volatile, and recruiters and employers need to think more creatively about how to attract and retain permanent staff, to bring about stability, including looking at recruiting more apprentices across a range of age groups.  Those employers who hold their nerve and invest in skills now are most likely to benefit most when the economic upturn comes.”

Neil Carberry, Chief Executive of the REC, said, “January’s recruitment activity suggests that speculation about a shallower economic downturn may be justified. Pay pressures remain strong in the Capital, despite the upturn in staff supply. Vacancies for permanent staff in London expanded in January and the growth in demand for temporary staff also outpaced that seen at the national level.

“Underpinning a sense of optimism, vacancies increased for both temporary and permanent roles in January. While this will reflect activity that may have been delayed from the autumn, it is another sign of firms feeling confident to hire, even if they are leaning more to temporary hiring than normal in this uncertain environment. That is the power of our temporary work market – it gives us a way to ensure firms can grow and people can build their careers even when the picture is uncertain.

“The need to address the fundamental challenges our labour market faces has not changed with the turning of the year. From skills to tackling economic inactivity, and from immigration to childcare there is much that can be done in partnership with business to help our economy grow and workers to prosper. Ahead of the Budget, the Chancellor should put the people stuff first across the whole of government. Every department has a role to play in getting growth going – and that starts with enabling our labour market.”


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