London employers focus on hiring contract workers amid uncertain outlook
Key points from June survey:
- Permanent hires fall; contract billings grow further
- Starting salary inflation remains weak…
- …while contract pay increases sharply
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Brexit stagnation continues to seize up the jobs market as the slowdown in recruitment activity continues. Permanent staff appointments fell again in June, the fourth month in a row, while subdued confidence ensured that growth in contract billings remained historically weak.
“As we approach the summer holidays, the worry is that vacancy growth – which held close to a multi-year low in June – is unlikely to bounce back as firms take a relatively cautious approach to hiring. Uncertainty is also likely to further dampen staff availability, as candidates are reluctant to change roles at this time. On a sector basis, IT & Computing continued to need more workers while construction and retail saw reduced demand.
“Looking ahead, conditions across the labour market are likely to remain restrained against a backdrop of political and economic uncertainty before companies can start to make more informed decisions on their long-term hiring.”
Neil Carberry, Chief Executive at the REC, said:
“The jobs market has slowed a little, but one issue which shows no sign of relenting is the shortage of qualified candidates in some areas.
“Agencies employing temporary workers do all they can to train them to fill these vacancies, but this is made more difficult by the constraints of the apprenticeship levy. It is high time that this policy was reformed.”
Uncertainty continues to dampen hiring activity
Recruitment consultancies signalled a further reduction in permanent staff appointments in London. In addition to market uncertainty, survey members highlighted a preference among clients for contract workers. That said, the drop in hiring was only slight and the slowest in the current four-month sequence of contraction.
Growth of contract billings accelerates
Agencies’ billings received from the employment of short-term staff in London rose further in June, stretching the current period of expansion to five months. Furthermore, the upturn was solid and the quickest since February. According to panellists, contract billings growth was boosted by a lack of confidence to hire permanent workers.
June data showed a renewed increase in permanent job vacancies across the capital, following contractions in April and May. However, the pace of growth was marginal and the slowest of all four monitored English regions.
At the same time, short-term job openings in London rose at the fastest pace since February. Regionally, only the North of England posted a quicker rate of expansion.
Talent pool shrinks amid Brexit worries
Recruitment consultants continued to report fewer candidates willing to undertake permanent employment in London. Companies indicated that future uncertainty had prevented workers from searching for other opportunities. There were also mentions of shortages of experienced jobseekers and an unwillingness among clients to train junior candidates.
Contract staff supply falls further
As has been the case for close to six years, contract staff availability in the capital declined during June. The fall was marked and the quickest in four months. Anecdotal evidence highlighted shortages of candidates for marketing, administration, hospitality, accountancy and IT positions. The contraction in London was the sharpest of all four monitored English regions.
Starting salary inflation remains modest
Although pay awarded to newly-hired permanent staff continued to increase in June, the rate of inflation held close to May’s 29-month low. Exactly 13% of panellists signalled higher starting salaries, with 81% indicating no change since May. The rise in London was by far the weakest out of all four monitored English regions.
Contract pay rises sharply
In contrast to the subdued trend for starting salaries, remuneration for contract workers increased sharply in June. Furthermore, the rate of inflation remained much higher than its long-run average and was close to May’s eight-month high. Survey participants suggested that a wide gap between staff supply and demand had boosted contract wages.
Official Data: UK Average Weekly Earnings
Latest data published by the Office for National Statistics indicated that average weekly earnings across the UK increased by 2.2% year-on-year over the first quarter of 2019. The upturn was led by the East Midlands, which saw pay increase 11.4% to £574. London was the only area to register lower pay compared to a year ago, with average weekly earnings falling by -2.3% to £762.
Recruitment consultancies across the UK recorded a fourth consecutive monthly reduction in permanent staff placements during June. The rate of decline was modest and only slightly softer than in May, but nonetheless marked the joint-longest fall in staff appointments in roughly a decade. Three of the four monitored English regions saw an overall drop in permanent hires, with the North of England the only area recording an increase.
At the same time, billings received from the employment of contract staff across the UK saw a marginal uptick. Despite rising from May, the rate of growth was the second-weakest in the current 74-month sequence of expansion. Higher contract billings in London and the South of England contrasted with slight declines in the Midlands and North of England.
Permanent labour supply deteriorated sharply in June, extending the current period of reduction to 74 months. Notably, the rate of decline remained much quicker than the historical average. All surveyed English regions registered an overall drop in candidate availability, with the South of England seeing the steepest fall and the Midlands the softest. Contract staff availability across the UK dropped at a slightly less marked pace in June. Nevertheless, the overall decline in short-term candidates remained sharp. The North of England registered only a marginal fall, the softest in the near six-year sequence of deterioration, whereas London saw the quickest
rate of contraction.
Starting salaries for permanent workers across the UK continued to rise in June, extending the current sequence of growth to just over seven years. The pace of increase was sharp and broadly in line with that seen in the past three months. The Midlands recorded the quickest rise in permanent starting salaries, while London continued to register the slowest increase.
Meanwhile, remuneration for contract staff across the UK rose sharply and at a similar pace to that seen in May. At the regional level, faster wage growth was recorded in the Midlands and North of England, while London and the South of England saw weaker increases in pay.
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