Average permanent salaries fell 3% in the 12 months to January 2023, according to staffing industry software provider Bullhorn, which measured the changes in white-collar jobs for the Association of Professional Staffing Companies (APSCo).
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Ann Swain, global CEO of APSCo, told HR magazine that while the data was focussed on professional sectors, it indicated a wider trend of tightening budgets.
She said: “Any decline in average permanent salaries suggests budgets are tightening in the highly skilled labour market.
“This presents a real challenge on a longer-term basis given that the UK is already struggling to attract the talent it needs to strengthen its reputation in fields such as technology and the sciences."
Despite the fall in salaries, APSCo data indicated a buoyant hiring market, with vacancies for permanent jobs up 2% on the previous quarter, and contract work rising by 3%.
The APSCo data has been backed up by economy-wide figures from the Recruitment and Employment Confederation, which announced yesterday (8 February) growth in vacancies had accelerated for the first time in nine months in January.
REC chief executive Neil Carberry said: “January’s recruitment activity suggests that speculation about a shallower economic downturn may be justified.”
He added that while permanent placements dropped for the fourth straight month, the pace of contraction has slowed and temporary billings growth had accelerated again.
The rise in vacancies, he said, was cause for optimism: “While this will reflect activity that may have been delayed from the autumn, it is another sign of firms feeling confident to hire, even if they are leaning more to temporary hiring than normal in this uncertain environment.
“That is the power of our temporary work market – it gives us a way to ensure firms can grow and people can build their careers even when the picture is uncertain.”
Swain said: “The recruitment market is always a bellwether for the economy, thus we would expect to see a downturn preceded by a fall in permanent vacancies and a rise in flexible working.
“However, the data is currently showing that permanent hiring is still stable, which points to two key trends. First, the economy isn’t perhaps struggling as much as predictions towards the end of 2022 suggested.
More importantly, she added, it showed that the hiring market is still extremely competitive in the UK.
She said: “We have to be mindful of the fact that the sheer scale of recruitment activity we saw last year was bound to slow at some point, and while there have been some signs from the likes of the ONS that hiring levels are dropping, the numbers themselves are still much higher than the UK is used to.”
