Permanent vacancies fall at fastest pace since COVID-19 pandemic

The latest KPMG and REC, UK Report on Jobs: London survey highlighted a deteriorated hiring landscape in September, following signs of recovery in the previous month.

Both new permanent placements and billings received from the employment of short-term workers fell at a stronger pace than observed in August.

Redundancies continued to fuel marked expansions in the supply of candidates. Recruiters in the capital also reported a decrease in open vacancies.

In fact, the decline in permanent roles was the most pronounced since August 2020 when demand for staff was severely impacted by the COVID-19 pandemic.

An increased supply of candidates, along with falling demand for labour, meant pay pressures across the capital were historically subdued and modest overall.

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.

Anna Purchas, London Office Senior Partner at KPMG UK, said: “After some signs of recovery in August, London’s jobs market slipped back in September, with permanent placements falling at a quicker pace. This isn’t across the board; we see significant variation by industry sector, with some such as parts of the construction sector, showing buoyancy in both the permanent and temporary jobs market.

“Weaker demand more broadly is keeping pay pressures subdued, which means businesses willing to invest now have a real opportunity to secure skills at more stable pay levels. We’re also seeing encouraging signs of a shift towards alternative routes into employment, such as apprenticeships, which help employers build the skills and resilience they need for the future.”

The number of people placed in permanent positions in London decreased during September. The sixth consecutive monthly reduction was sharp and more pronounced than that recorded in the month prior, albeit weaker than the UK-wide average. Recruiters attributed the latest fall to a combination of limited job openings and prevailing economic uncertainty.

Of the four monitored English regions, the Midlands was the only other area where permanent staff joiners fell at a quicker pace than in August. Nonetheless, the Midlands recorded the weakest contraction overall. The South of England once again registered the strongest reduction.

Billings received from the employment of temporary staff also fell at a quicker pace in September, thereby extending the current sequence of decrease to 21 months. The rate of contraction was rapid and notably more pronounced than seen in August. Anecdotal evidence suggested that the reduction in billed hours was attributed to fewer available roles and the shortening of contracts.

A renewed expansion in temp billings across the North of England meant that the South of England was the only other region alongside London to record a contraction. Meanwhile, the Midlands saw a further uptick.

Permanent vacancies fell across the capital in September. The rate of contraction was rapid overall and after having quickened for a fourth month straight, the strongest since August 2020. Excluding the COVID-19 pandemic period the decline was the most pronounced since March 2009.

Demand for temp workers also deteriorated more markedly in September. The rate of contraction was sharp and the fastest since April.

In both cases, the downturns were more pronounced than those observed for the UK as a whole, where the rates of decline remained largely unchanged over the course of the month.

The availability of candidates seeking permanent positions rose for a thirty-fourth consecutive month in September. The pace of expansion was marked, albeit the weakest in four months. Redundancies was a key factor contributing to the increased supply of candidates.

Among the four tracked English regions, London experienced the largest easing in the pace of growth of candidate numbers, placing it at the bottom of the rankings. Softer expansions in the supply of permanent staff were also noted in the other monitored English regions.

Following a robust increase in the previous month, the rate of temporary staff supply growth in September softened but broadly aligned with the rapid expansions observed in the first half of the year. The latest increase was attributed to a reduction in freelance roles, fewer contracts, and a lack of new permanent positions.

A notable loss of growth momentum meant that London recorded the weakest expansion of the four monitored English regions. Meanwhile, the South of England recorded the fastest increase.

After reaching a nine-month low in July, the seasonally adjusted Permanent Salaries Index has remained largely stable since then, with September indicating only a modest increase in starting pay — one of the weakest this side of the pandemic and historically subdued. Rising cost concerns and a market slowdown prompted some businesses to lower their pay, while others raised their offers to attract suitable candidates, recruiters noted.

The Midlands was the only other monitored English area where starting salaries rose, though there too the pace of inflation was weaker than the long-run average. Meanwhile, both the South and North of England recorded further decreases in permanent starting salaries.

September data highlighted a rise in temporary wages across London. The increase was solid, but much weaker than that seen in August. Where temp wages rose, recruiters linked this to recent placements being made at higher rates.

Moreover, the pace at which hourly pay rose across London remained stronger than the UK-wide average. Temp rates also rose across the Midlands, but fell in the remaining two tracked English areas.

Neil Carberry, REC Chief Executive, said: “Recruiters have been reporting a trend towards stabilisation in the permanent job market since the summer, and today’s data back that up for September. The temporary market remains somewhat healthier, with growth in some regions. We can hope that the jobs market and the economy may be moving towards calmer waters, but falling vacancies is a reminder that what is really needed is a shot of confidence in the wider economy to get things going.

“Pay trends remain subdued where pay is set by the market rather than the Government. This suggests that pay growth should not be a drag on the Bank of England’s upcoming interest rate decision.

“The economic picture is still challenging for employers, with pressures beyond their control. A genuinely pro-business, pro-growth Autumn Budget next month could provide much-needed relief, by avoiding unaffordable tax rises on business, committing to real practicality on the Employment Rights Bill, supporting flexible work and reforming public sector hiring.”