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Langley James IT Recruitment Market Review – UK Wide – April 2019

May 15, 2019 . 9:00 am

Key points from the April survey:
– Permanent staff appointments fall slightly, but contract billings rise
– Staff vacancies rise at the slowest rate since August 2012
– Candidate shortages continue to push up starting pay

Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“This report shows how the UK jobs market has seized up, with both employers and candidates waiting to see which direction Brexit is going to go in. For now, this smothers the prospects for growth and makes it a lot harder for companies looking to innovate.
“Overall employers have hired fewer permanent staff in three of the past four months and most of the firms we’re speaking to say that uncertainty around Brexit is to blame. A subdued public sector is also contributing to the wider picture.
“On the supply side, a high rate of employment and the apprehension of potential candidates means there just aren’t a lot of suitably skilled people out there to hire anyway. This is an increasing problem for firms in technology, health, and engineering who are experiencing a skills gap.
“Concern over the long-term picture means now is a good time to be a temp’ with steep increases in pay for both day rate and short contract workers.”

Neil Carberry, Chief Executive of the Recruitment & Employment Confederation, said:
“Employers are turning to temporary work to support their business and offer people opportunity while the long-term economic picture is unclear.
“We should be proud of how our jobs market has adapted to challenging circumstances. Resolving Brexit will bring some certainty, but we must also take bold steps to fix the underlying problems suggested by these figures.”

Executive Summary

Uncertain outlook continues to dampen recruitment activity
Latest data signalled that permanent staff hiring declined again in April, though the rate of reduction softened from March’s 32-month record and was only slight. Recruitment consultants widely commented that Brexit-related uncertainty had impacted on hiring decisions. At the same time, billings from the recruitment of contract workers rose at a quicker pace amid reports of firm demand for short-term staff.
Staff demand rises at slowest rate since August 2012
The index measuring overall vacancies edged down further in April, to signal the weakest increase in demand for staff since August 2012. The softer expansion in total vacancies was predominantly driven by a slower rise in permanent staff demand.
Availability of candidates declines again in April
A reluctance among workers to seek new roles due to uncertainty related to Brexit, as well as a generally low unemployment rate, led to a further decline in staff availability. That said, both permanent and contract worker supply deteriorated at softer rates.
Pay growth remains historically sharp
Greater competition for scarce candidates contributed to steep increases in pay for both permanent and contract workers. That said, the rate of starting salary inflation was the softest seen for two years. In contrast, contract wages rose at the strongest rate since January.

Staff Appointments

Softer fall in permanent staff appointments
The seasonally adjusted Permanent Placements Index signalled a further decline in the number of people placed into permanent jobs during April. That said, the rate of reduction eased from March’s 32-month record and was fractional overall. Nonetheless, permanent staff hires have now declined in three of the past four months. Recruitment consultancies widely reported that uncertainty around Brexit had led firms to pause any hiring decisions. There were also reports that a lack of suitably skilled candidates and relatively stagnant market conditions had hampered recruitment at the start of the second quarter.
London recorded the quickest drop in permanent staff appointments of all four English regions. In fact, the North of England was the only area to see an increase in permanent placements during April.
Contract billings growth quickens in April
April survey data pointed to a further increase in contract billings at recruitment agencies. The rate of expansion quickened since March and was solid overall. However, growth remained among the slowest seen over the past three years. A number of recruiters mentioned that firm demand for short-term staff and increased business activity at clients had underpinned the latest rise in contract billings.
On a regional basis, the North of England noted the quickest rate of increase, closely followed by the South. The Midlands meanwhile noted the first reduction in contract billings for just over seven years.

Vacancy growth at 80-month low
The Total Vacancies Index fell from 55.5 in March to 53.6 in April, to point to a softer increase in overall demand for staff. Furthermore, the latest reading was the lowest recorded since August 2012. 
Permanent and contract vacancies
The weaker rise in overall vacancies was largely driven by softer demand for permanent staff. The latest increase in permanent job postings, though strong, was the slowest recorded since August 2012. Meanwhile, contract staff vacancies rose at a fractionally slower rate, leaving the respective index at a 32-month low.
Public & private sector vacancies
April data continued to point to subdued public sector staff demand compared to the private sector. In the public sector, permanent vacancies fell slightly, but rose marginally for contract workers. Demand for permanent staff in the private sector meanwhile rose at a softer, but still strong, rate and strengthened for contract workers.

Official Data: UK Job Vacancies
Latest official data from the Office for National Statistics (ONS) showed that the number of staff vacancies rose by 3.9% year-on- year in the three months to March. This meant that the total number of job vacancies stood at 852,000. Though still historically high, the number of vacancies have now fallen in each of the past two survey periods, to slip further from the record high of 864,000 in the three months to January.

Vacancies by Sector

Permanent vacancies
IT & Computing topped the rankings for permanent staff demand, closely followed by Nursing/Medical/Care and Engineering. However, the majority of monitored sectors noted softer increases in vacancies. Retail noted a sharper decline.
Contract vacancies
The quickest increase in contract staff vacancies was again seen in Nursing/Medical/Care in April. Blue Collar and Hotel & Catering completed the top three in the rankings. In contrast, short-term vacancies fell in executive/Professional and Retail.

Staff Availability

April sees further marked fall in candidate numbers
Recruitment consultancies continued to signal a drop in the number of candidates available to fill roles during April. Overall candidate availability has now fallen continuously since May 2013. The supply of permanent workers continued to contract at a quicker pace than that seen for short-term staff, but rates of reduction remained historically marked in both cases.
Downturn in permanent staff availability eases slightly
Latest survey data signalled a softer, but still steep, reduction in the number of candidates available for permanent job roles. Despite easing to the weakest in just over a year, the rate of decline remained much sharper than the long-run series average. A generally tight labour market and a reluctance among candidates to seek out new roles amid an uncertain economic outlook were the main factors cited by recruiters as having driven the latest drop in permanent staff supply.
Lower permanent worker availability was evident across all four monitored English regions.
Contract candidate supply deteriorates further
The supply of short-term workers declined for the seventieth successive month in April. The rate of reduction remained sharp overall, despite softening to the least marked in 27 months. Reports from panellists indicated that Brexit related uncertainty, fewer EU candidates and a generally low unemployment rate had all contributed to the fall in candidate supply.
The South of England registered the quickest drop in contract candidate numbers, though marked reductions were also seen elsewhere.

Pay Pressures

Salaries for permanent starters continue to rise markedly
Recruitment agencies signalled a further sharp increase in starting salaries for permanent workers in April. This was despite the rate of inflation edging down to a two-year low. Reports from panellists indicated that candidate shortages had continued to push up pay at the start of the second quarter.
The strongest rise in starting salaries was seen in the South of England, while the weakest was recorded in London.
Contract pay growth picks up in April
Pay awarded to contract staff increased for the seventy-fifth month running in April. Furthermore, the rate of inflation picked up from March’s two-year low and was sharp overall. Low candidate availability had reportedly underpinned the latest increase in hourly rates of pay for short term workers.
Data broken down by region pointed to higher contract wages across all areas, led by the North of England.

Official Data: UK Average Weekly Earnings
Data from the Office for National Statistics showed that employee earnings (including bonuses) rose by 3.5% on an annual basis in the three months to February. This was unchanged from the previous two periods, and indicated that pay growth is running at its highest level in over 10 years.
The private sector continued to register a quicker increase in earnings compared to the public sector, with the former seeing pay rise by 3.6% year-on-year over the three months to February, compared to a 2.6% increase for the latter.

Feature: Workforce Capacity and Planning

Employers signal squeezed workforce capacity and rising pay
The latest Recruitment and Employment Confederation JobsOutlook survey showed that employers registered a drop in spare workforce capacity in April compared to a year ago. Notably, the proportion of employers registering little or no spare capacity (unless they create additional jobs), rose from 77% to 80%. This was close to the record high of 83% in mid-2017.
On the flipside, the percentage of employers that signalled a fair amount or considerable surplus of workforce capacity fell from 24% a year ago to just one-in-five in April.
Squeezed workforce capacity has coincided with a surge in the level of employment in recent years, which has seen the rate of unemployment tumble to its lowest since 1975 at 3.9%, as firms have added to
their payrolls due to rising business requirements. Consequently, the employment rate has risen to a joint-record high of 76.1%.
When asked about the changes to their workforces in the past year, around two-thirds of employers (65%), indicated that they had increased pay, up from 47% in April 2018.
At the same time, 58% of employers said they had expanded staffing levels compared to a year ago, which also marked a strong rise from 44% in April of last year.
However, a low unemployment rate and widespread skill shortages are likely to hamper firms’ ability to expand this year. Furthermore, tight labour market conditions have meant that employers are now having to offer higher pay to secure new staff or even retain current employees. Official data have confirmed the signals provided by both the JobsOutlook and Report on Jobs surveys, and showed total pay (including bonuses) rising by 3.5% and
regular pay (excluding bonuses) expanding at 3.4% year-on-year in the three months to February. The recent pay figures point to the strongest period of earnings growth for around 10 years.
The lack of spare capacity means that employers will need to hire quickly if demand for their services or products increases. This makes it more important than ever to review current hiring procedures in order to compete for key staff in an increasingly tight labour market. Facilitating this review process is the core aim of the REC’s Good Recruitment Campaign; the need to drive recruitment innovation is also providing opportunities for recruitment businesses to work more strategically with their clients.

About Langley James

Langley James was founded in 1999 by James Toovey, a highly respected recruitment industry professional.  James wanted to provide something unique: a bespoke recruitment service which was founded on service excellence.  With offices in London and Chester, we are now providing our recruitment services throughout the world and over the last 19 years have worked with some of the most respected companies.
To find out why so many companies turn to Langley James for support in fulfilling their IT recruitment needs, call and speak to one of our specialist consultants today on 0207 788 6600.

In conjunction with: IHS Markit and sponsored by the Recruitment and Employment Confederation.

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