Report On Jobs: Employers’ confidence in the UK economy starts seeing improvement

The KPMG and REC, UK Report on Jobs uniquely provides the most comprehensive guide to the labour market, drawing on original survey data provided by recruitment consultancies, such as Redline Group, and employers to provide the first indication each month of labour market trends. Here are the main findings from the July report.

Overview:

• Employers’ started regaining confidence in economic outlook.
• Starting Salaries for permanent employees rose sharply.
• Demand for staff moderated in July.

In July, starting salaries for permanent employees rose sharply. The sharpest upturn in overall labour supply was noted since December 2020. However, the growth of demand for staff continued to moderate with candidate employability largely limited by a lack of key skills. However, on a positive note, employers' hiring intentions increased as some economic and investment confidence rebounded.

The Office for National Statistics (ONS) in July also shared that the number of vacancies in April to June 2023 was 1,034,000, a small decrease of 85,000 from earlier in 2023 but still higher than pre-COVID levels. They estimated that the number of workforce jobs for March 2023 was a record high of 36.8 million, an increase of 395,000 jobs since December 2022 and an increase of 1.2 million since December 2019.

Permanent Placements Decrease:

The Permanent Placements Index moved further below the neutral 50.0 level in July, to signal a steeper fall in the number of people placed into permanent job roles across the UK. Recruiters also reported that a weaker economic outlook and drop in client confidence had led to greater hesitancy to commit to new permanent hires. While redundancies and hiring freezes had underpinned the latest improvement in staff availability, the lack of candidates with specific skills was often cited as a factor limiting recruiters' ability to fill roles. Speaking about this, Claire Warnes, Partner, Skills, and Productivity at KPMG UK, said: “The latest survey results reflect the current summer weather – damp, but with some possible bright skies on the horizon. Recruiters told us that their clients aren’t yet confident enough in the economic outlook to commit to permanent hires, leading to the steepest pace of decline in placements since June 2020.”

Engineering was among the monitored job categories that registered an increase in staff demand in July, showing the second-strongest rise in demand for temp/contract vacancies. Skills shortages were noted for software developers, electronics, hardware, mechanical, electrical, service and cloud engineering. Contractor demand continued in most engineering and software areas, especially developers and software engineers.

Candidate Supply Continues to Increase:

A sustained slowdown in the growth of demand for staff was noted in this month’s report. July survey data signalled historically subdued upturns in demand for both permanent and temporary staff across the UK. The total candidate supply, on the other hand, expanded for the fifth consecutive month across the UK. Recruiters also noticed a sharp rise in the availability of permanent workers at the start of the third quarter, with contract/temporary candidate numbers also rising, albeit not as sharply. Average starting salaries for people placed in permanent and temporary/contract roles both increased further. The supply of permanent labour has now risen in each of the past five months, with the latest expansion the steepest seen in just over two-and-a-half years. Reports attributed the rise to company redundancies and restructuring plans, alongside the general slowdown in permanent hiring. Contract/temporary candidate numbers also gathered pace, though not as rapidly as that seen for permanent labour supply. 

Neil Carberry, REC Chief Executive, said: “The jobs market overall remains fairly robust, with vacancies and pay still rising and unemployment low but there is a sense in today’s report that the economy will need some growth soon to sustain this positive picture. Permanent hiring has been slowing all year. To some extent this is normalisation as the post-pandemic boom abates – but it is also driven by uncertainty. This is seen in the scale of companies reshaping themselves while hiring in other areas – recruiters report that the quickest rise in labour supply since the pandemic has been driven by an increase in redundancies. But it is also obvious in the way firms are relying on temporary labour to keep things going in uncertain times.”

Future Outlook:

Several trends are clear from labour market statistics: confidence among businesses is marginally better and starting pay keeps going up. 

A survey by the Confederation of British Industry showed that confidence among businesses has improved for the first time in two years. However, it is best not to get too excited because closer inspection shows that, despite greater candidate availability, businesses are still struggling to fill roles, which means that they cannot maximise revenues at a time that inflation is biting.

Hirers are acting with speed and agility like never before to secure workers. For instance, recruiters tell us that a majority of candidates do not just want a job or a pay rise, they demand training and development opportunities and work-life balance. This means that recruiters need to help re-design roles to make them attractive enough in the competition for talent. A saving grace is the sheer amount of research on recruitment trends and statistics which gives them an advantage in other industries. And a further sign of hope is the Bank of England’s latest monetary report prediction that the labour market has started to loosen up and they expect employment growth.

Redline Group changes lives every day, building world-class teams for technology companies. We continue to be one of the UK’s most trusted Electronics and High Technology recruitment specialists for professional Contract, Permanent and Executive positions. With four decades of experience our passionate, knowledge-led people create trusted recruitment solutions, Redline is perfectly positioned to offer advice about future-proofing your permanent, contract and interim needs in the technology sector.  

For more information about this month's report, contact David Collins on DCollins@RedlineGroup.com or call him at 01582 878804.