Slowest fall in permanent placements for three months

The latest KPMG and REC, UK Report on Jobs revealed persistent challenges in London’s labour market. That said, latest decreases in permanent placements and temp billings softened from the previous month, with the former signalling the least pronounced drop of the four monitored English regions. Nevertheless, vacancies fell at a faster pace, resulting in notable increases in the supply of both permanent and temporary workers.

This imbalance led to a further cooling in permanent starting salary inflation. In fact, pay offered to new permanent joiners rose only fractionally and at the weakest pace in the current 44-month sequence of inflation. Meanwhile, hourly pay rates rose for the first time in three months, though even here the pace of increase was well below the long-run average.

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. Office Senior Partner at KPMG in London, said: ““As is the case across the country, many London firms held back on hiring knowing that the Autumn Budget could change the cost of taking on staff. The Chancellor’s National Insurance increase did just that.

“An interesting finding is that London’s labour market remains more resilient than other parts of the UK. There’s variation by sector, but overall, the capital is experiencing a much milder decline in permanent hires and even a slight rise in pay for temporary roles which bodes well should firms start putting 2025 recruitment plans into action now the broader economic picture is clearer.”

Downturn in new permanent joiners softens notably

Recruiters across London recorded a fall in permanent placements during the latest survey period. Excluding July, the respective seasonally adjusted index has printed in contraction territory in each month since October 2022. Anecdotal evidence suggested that many companies paused hiring in anticipation of clarity from the Autumn Budget. The rate of decrease was solid, but eased considerably from September and was the weakest among the four monitored regions in England.

In fact, London defied the general trend by being the only monitored area to experience a milder decline in new permanent joiners. In contrast, all the remaining three regions reported stronger contractions, with the South of England leading the downturn for an eighth consecutive month.

Temp billings were reduced for a tenth straight month across London in October. Though moderating slightly compared to the previous month, the rate of decrease was rapid and exceeded the UK-wide average. The latest drop was primarily attributed to a lack of new business at companies, leading to non-renewals of contracts, along with a general hiring hiatus as companies waited for the outcome of the budget.

A slight, yet fresh increase in temporary billings in the North of England meant that contractions were confined to the South of England and London. Meanwhile, the Midlands posted a solid expansion that was sharper than in September.
Demand for labour further deteriorated across the capital in October. Both permanent and temporary vacancies experienced sharper reductions compared to the previous month, with temporary positions registering the most significant drop since July 2020.

Among the four monitored English regions, the North of England was the only area to see an increase in both permanent and temporary vacancies. However, the rates of growth were only marginal.

Marked and quicker expansion in permanent staff supply

October data revealed a marked rise in the number of permanent candidates available in London, thereby stretching the current streak of growth to nearly two years. Additionally, the rate of increase reached a three-month high, with London experiencing the strongest rise among the four monitored English regions. This upturn was widely attributed to redundancies.

Regional data showed that the South of England, along with London, experienced stronger rates of expansion in permanent staff availability. In contrast, the North of England and the Midlands recorded softer rates of increases, with the latter registering the slowest rise among the four areas.

Stretching the trend that started in January 2023, London recruiters noted an increase in the availability of temporary staff in October. The rate of expansion accelerated to the fastest since April and was robust. All four monitored English regions reported marked and sharper increases in October, with London at the forefront of this upturn. Recruiters often commented on reduced demand for temporary workers which led to an excess supply of candidates.

Permanent salary inflation cools

Salaries awarded to new permanent hires rose across London during October, albeit only marginally. The pace of salary inflation eased for a fourth month running to the weakest in the current 44-month sequence of inflation. While some companies were willing to offer higher salaries to attract the right skill sets, the excess supply of workers and fears of increased taxes led others to be more stringent with their offers.

All four English regions observed starting salary inflation rates increasing at levels well below their respective series averages, with London exhibiting the weakest increase.

Following two consecutive months of decline in pay rates for short-term staff, London experienced a renewed increase in October. This rise in temporary wages aligned with a fresh increase at the UK level. According to recruiters, businesses adjusted their hourly rates to keep pace with inflation.

Additionally, renewed rises noted for both the Midlands and the South of England meant that all four monitored regions saw temp rates rise for the first time since June.

Neil Carberry, REC Chief Executive, said: “These figures are a timely reminder that demand from employers for new staff has weakened since the election – though the overall picture remains resilient by comparison to pre-pandemic. And there was a more robust performance in London, which is often a bellwether. But things now stand in the balance – firms need to be persuaded to invest, with recent changes to NI thresholds, the minimum wage and prospective changes to employment law all causing concern. Firms will be looking for the Government to deliver a clear, stable growth plan and detailed regulatory changes that enable firms rather than put them off over the next few months. Temporary work in particular is a fantastic way of helping people take steps out of inactivity, and the threat of new employment laws undermining opportunities for workers must be addressed.

“Permanent salary inflation cooling in London suggests the Bank of England should not step away from further cuts to interest rates, which will also boost business confidence. And data on shortage sectors across the UK is a timely reminder that delivering on a skill strategy that is aligned to business needs is one of the biggest things Government and businesses could achieve working together.”