Key points from the July survey:

– Permanent placement growth softens to nine-month low
– Staff vacancies expand at quickest rate since last November
– Decline in candidate availability eases, but remains historically sharp

Sophie Wingfield, Head of Policy at REC says:

“The rise in interest rates for only the second time in a decade may leave some people feeling the pinch. But a new job is one way people can ease the burden on their finances. With our data showing starting salaries continuing to rise, the latest official government figures suggest that we are finally seeing the effects of a tighter labour market feed through to pay.

Executive Summary

Softer rise in permanent staff appointments…
Permanent placements continued to rise sharply in July, though the rate of expansion was the softest recorded since last October. Contract billings also increased strongly, with the rate of growth picking up from June’s recent low.
…as supply of candidates continues to drop markedly
Recruitment agencies indicated that candidate shortages weighed on permanent staff appointments. Notably, the supply of both permanent and contract candidates fell sharply in July, despite rates of decline easing to the weakest in three months in both cases.
Staff vacancies rise at quicker pace…
Demand for staff strengthened further in July, with overall job vacancies expanding at the quickest rate for eight months. Growth was led by the private sector, with demand for both permanent and contract workers continuing to rise at rates that comfortably outstripped those seen in the public sector.
…maintaining upward pressure on pay
Low candidate availability and robust demand for staff led to a further steep increase in salaries awarded to permanent starters. At the same time, contract pay rates rose at a marked and accelerated rate that was close to April’s two-year record.

Staff Appointments

Softest increase in permanent placements since last October
UK recruitment consultancies signalled a sustained rise in the amount of people placed into permanent job roles in July, thereby extending the current trend to two years. Though sharp, the rate of expansion eased for the fourth month in a row to the softest recorded since last October. Anecdotal evidence indicated that robust demand for staff and quicker decision-making at clients had driven the latest upturn in permanent staff appointments. However, a number of panellists commented that widespread candidate shortages weighed on overall growth. Permanent placements rose at faster rates in the Midlands and the South of England, but growth softened in the North of England. In contrast, permanent staff appointments fell slightly in London.

Contract billings growth accelerates
Survey data for July signalled a further steep increase in agencies’ billings received from the employment of contract staff. Notably, the rate of growth picked up from June’s three-month low and was stronger than the historical series average. Increased activity at clients and, in some cases, a lack of available permanent candidates, were linked by respondents to higher contract billings at the start of the third quarter. Growth was broad-based across the four monitored English regions during July, with the sharpest rate of increase seen in the North of England.


Stronger rise in staff vacancies
Recruitment consultancies signalled that demand for staff continued to rise at a historically sharp pace at the start of the third quarter. Notably, the Report on Jobs Vacancy Index was up from 61.9 in June to 62.1 in July, to indicate the steepest increase in job vacancies since November last year. Growth of demand quickened across both permanent and contract job categories, with the former noting the steeper rate of expansion.

Public & private sector vacancies
July data indicated that demand for staff continued to increase at a considerably stronger pace in the private sector than in the public sector. The strongest increase in staff vacancies was seen for permanent private sector workers, while the weakest rise was signalled for public sector permanent roles.

Other vacancy indicators
Latest official data from the Office for National Statistics (ONS) showed that job vacancies rose by 5.0% year-on-year in the three months to June. This was stronger than the 4.1% rate of growth seen in the prior three-month period. Furthermore, the total number of vacancies reached a fresh record high (824,000). Latest available data signalled that internet-based recruitment spending declined by 5.5% on an annual basis during the opening quarter of 2018. This was softer than the 7.9% drop seen in the final quarter of last year.

Staff Availability

Availability of permanent staff
Permanent staff availability continued to decline sharply at the start of the third quarter, despite the rate of reduction softening to the least marked in three months. Reports from panellists indicated that candidate shortages generally stemmed from a low unemployment rate. At the same time, uncertainty towards the outlook had reportedly led some people to become more cautious towards taking up new roles. All four monitored English regions signalled sharp declines in permanent staff supply, led by the South of England.

Availability of contract staff
The supply of contract workers fell further in July. Despite softening to the least marked since April, the rate of reduction remained elevated by historical standards. The steepest decline was seen in the Midlands, though marked reductions were also registered elsewhere.

Pay Pressures

Permanent salaries Starting salaries for people placed into permanent roles increased for the seventy-fifth successive month in July. Although the rate of pay inflation eased to the weakest since March, it remained sharp overall and quicker than the long-run series average. Panellists widely linked the latest increase in starting pay to low candidate supply and greater efforts from clients to secure candidates. Marked increases in starting salaries were registered across all four monitored English regions.

Contract pay rates
Contract hourly pay rates rose again in July, thereby extending the current trend to five-and-a-half years. Notably, the rate of inflation accelerated since June and was only fractionally below April’s two-year peak. The strongest increase in contract pay was seen in the North of England, while the weakest was reported in London.

Employment Outlook – UK firms expect to raise staff numbers

The latest Global Business Outlook data, compiled by IHS Markit, indicated that UK private sector firms continued to express positive sentiment towards future staff hiring in June.

When looking across the manufacturing and service sectors as a whole, a net balance of +23% of firms anticipated hiring additional employees over the next year, which was down only slightly from +24% in February. This compared favourably with the EU (21%) and Global (+17%) averages, which had both fallen since the start of the year.

Nonetheless, UK firms expressed concerns over an uncertain economic outlook, largely due to the possibility of a ‘no deal’ Brexit, which reportedly weighed on overall sentiment. In addition, the potential impact of ongoing global trade wars also dampened confidence towards future hiring, most notably in the manufacturing sector.

The net balance of good producers forecasting higher employment declined from a near four-year high of +36% in February to its lowest level for nearly two years in June (+26%). In contrast, service providers revised up their job creation plans, though only slightly, with the net balance of firms anticipating an increase edging up from +21% in February to +23% in June.

About Langley James

Langley James was founded in 1999 by James Toovey, a highly respected recruitment industry professional.  James wanted to provide something unique: a bespoke recruitment service which was founded on service excellence.  With offices in London and Chester, we are now providing our recruitment services throughout the world and over the last 18 years have worked with some of the most respected companies.

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