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Recruitment declines while labour supply jumps

This marks a year and a half of decline in UK recruitment

Recruitment continued to decline in March, a survey of 400 recruitment and employment consultancies by KPMG and the Recruitment and Employment Confederation (REC) showed today.

The survey found that demand for permanent staff fell at a significantly faster rate than for temporary workers.

At the same time, there was a rapid and accelerated increase in the availability of staff in March, marking the fifth successive month that growth has been registered.

Meanwhile permanent staff pay growth is at its weakest rate in over three years. For temporary staff, growth was at its slowest in four months.

This is despite real pay growth strengthening in the previous quarter, according to the latest labour market data from the Office for National Statistics (ONS). 

Neil Carberry, the REC's chief executive, explained that the decline in recruitment is a continued trend.

He said: “The decline in permanent placements has been steady for some months now, with temporary recruitment still robust, if falling back from the record highs of 2022/3. 

“Employers appear to be leaning on temporary work while they are uncertain about the path of the economy.”

Read more: Vacancies fall while real pay growth strengthens

Ben Keighley, founder of AI recruitment platform Socially Recruited, told HR magazine that employers have been waiting on the economy to strengthen before recruiting.

He said: “The consensus might be that the UK’s recession will be shallow and short, but the weakness of the economy is nevertheless weighing on employer sentiment and slowing the creation of new roles and the replacement of staff in some sectors.”

Lennie Higgs, director at recruitment firm ManpowerGroup UK, explained that employers might be attracted to more temporary labour due to recent economic uncertainty.

Speaking to HR magazine, she said: “It appears that the UK labour market has entered a period of stabilisation, with something of a reset now underway.  

“One reason temporary labour may be proving more popular right now is because of recent economic uncertainties, including the shallow recession recorded at the tail end of 2023.”

Higgs attributed the rise in labour supply in March to the decline in vacancies the previous quarter. ONS figures showed that from December 2023 to February 2024 the number of vacancies in the UK fell by 43,000 to 908,000 for the 20th consecutive period.

She continued: “Recent rises in the labour supply can be partly attributed to a decline in overall vacancies and partly to cost of living pressures, meaning that more people who would be classed as economically inactive are now looking to re-enter the workforce. 

Read more: How can quiet hiring help to tackle skills shortages?

“The rise is also largely because there is a significant and ongoing mismatch between the available talent and advertised vacancies. 

“This rise in candidates may be one reason we’re seeing a slowdown in pay growth, although it’s worth noting that wages typically lag behind the inflation rate, which has been steadily declining over recent months.”

Keighley noted that the slowing of pay growth has impacted how employers recruit.

He commented: “Overall, the market still remains very tight, with vacancies still well above pre-pandemic levels. The number of unemployed jobseekers is not even close to keeping up with employer demand.

“That’s why many employers are instead focusing their attention on luring recruits away from other jobs, and targeting ‘passive candidates’, people who are already in work but might be tempted to move if approached in the right way.

“Meanwhile, the cost of hiring is coming down as inflation falls and wage growth slows. Many employers feel they no longer need to offer such high salaries to new starters or significantly increase pay for their existing staff because cost of living pressures are less urgent than they were.”

Higgs advised employers to focus on skills-based hiring amid the current job market.

She added: “There is no quick-fix solution to this situation, but we are advising employers of all sizes and sectors to place greater emphasis on skills-based hiring, workplace culture and employee value positions if they are to retain and attract the best talent during these challenging times for recruitment.”