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Permanent staff appointments decline as Brexit-related uncertainty intensifies, REC finds

The latest KPMG and REC UK Report on Jobs showed that heightened uncertainty towards the outlook underpinned the fastest decline in permanent staff appointments since mid-2016 in March. Brexit-related uncertainty also contributed to a further steep decline in staff availability.

The report, which is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies, showed that permanent staff appointments fell for the second time in three months in March, and at the quickest rate since the aftermath of the Brexit referendum result in July 2016.  Concurrently, billings received from the employment of short-term staff rose at the second-slowest rate for two-and-a-half years.

Low candidate availability also continued to hamper staff hiring, with recruiters noting further sharp falls in both permanent and temporary candidate numbers. This, in turn, sustained upward pressure on rates of pay. That said, growth of both permanent starters’ salaries and temp wages waned slightly since February. Meanwhile, overall demand for staff expanded at the softest rate since August 2016.

Recruitment consultancies signalled a renewed drop in permanent staff appointments amid heightened uncertainty towards the outlook and reports of delayed decision making. Though modest, the rate of reduction was the fastest seen since July 2016. Temp billings meanwhile expanded at the second-slowest rate for two-and-a-half years (after January 2019).

Although still indicative of a strong rise in overall demand for staff, the index measuring vacancies edged down again in March. Notably, demand for workers increased at the softest pace since August 2016, with both permanent and short-term vacancies rising at slower rates.

The availability of both permanent and temporary staff continued to fall markedly at the end of the first quarter. Recruiters commonly linked the fall to a reluctance among candidates to move roles amid Brexit-related uncertainty, and a generally low unemployment rate across the UK.

A combination of lower candidate availability and strong demand for staff led to further increases in pay. That said, rates of pay growth softened since February. The latest increase in starting salaries, though sharp, was the slowest recorded for just under two years. Meanwhile, temp pay growth was the least marked since March 2017.                                                                                     

Regional data showed that permanent staff appointments declined in the Midlands, London and the South of England. Meanwhile, the North of England signalled a modest expansion. The North of England registered a marked rise in temp billings, while softer increases were seen in London and the Midlands. In contrast, the South of England saw a renewed reduction.

Data showed a relatively weak picture for public staff demand compared to the private sector. Demand for both permanent and temporary workers in the private sector continued to rise strongly in March, albeit at weaker rates than seen in February. In contrast, permanent public sector vacancies declined solidly, while temp worker demand in the sector rose only slightly. IT & computing and engineering topped the rankings for permanent staff demand at the end of the first quarter. Increased vacancies were also seen across the other monitored sectors, with the exception of retail.

Nursing/medical/care saw by far the strongest increase in demand for temporary workers during March, with Hotel & Catering in second place. However, executive & professional and retail both saw temp vacancies fall in the latest survey period.

Neil Carberry, Recruitment & Employment Confederation chief executive, said, “We have a fantastic labour market that has delivered high employment and flexibility for workers because it helps companies meet their needs easily. It’s a British success story. But Brexit uncertainty has put the brakes on.

“With business investment rates poor, and little certainty about the path ahead, today’s data shows that the time for political game-playing is over – this situation is beginning to affect people’s daily lives as permanent staff appointments fell, and the growth of temporary jobs and starting salaries weakened.

“We can make this slowdown a blip. Ending the uncertainty around Brexit will help firms invest and create jobs. Firms across the country need a stable plan that tells them where they will be next year – not next week.

“Two years on from its introduction, the apprenticeship levy has failed to deliver for people building their careers by working on flexible and temporary contracts. It is time this changed – a flexible skills levy that helps firms to invest in every worker would boost productivity and opportunity for temporary and permanent staff alike.”

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