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Langley James IT Recruitment Market Review – UK Wide – December 2018

January 10, 2019 . 4:47 pm

Key points from the December survey:
– Permanent appointments rise at slowest rate since April 2017…
– …as the supply of candidates falls sharply…
– …leading to further marked increases in starting pay

Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“A lack of work ready candidates is really beginning to bite UK businesses and the situation is worsening. Many of the UK’s main sectors are now struggling to hire staff. It really is a candidates market at the
moment. 
“A lot of people don’t want to move jobs right now because there is so much uncertainty around. In addition, the supply of EU citizens entering the UK for work is slowing whilst every sector continues to
take on more staff. This means a near-record number of vacancies are going unfilled and talent gaps in industries like engineering, finance, and IT are opening up.
“December is always a bit of lean period in the jobs market but Brexit has amplified that effect. Consequently companies are having to offer increasingly attractive and creative packages to tempt new
talent on board. If you aren’t looking forward to another year in your current job, now is a good time to go job hunting.”

Neil Carberry, Recruitment & Employment Confederation Chief Executive, said:
“It’s no surprise that growth in new permanent jobs dropped to its lowest level in almost two years last month, because economic uncertainty is now affecting companies’ hiring plans. But the underlying strength of our labour market is still there – vacancies are high and contract

placements rose in the run-up to Christmas. There are opportunities out there for people who want to change job in 2019.”

Executive Summary

Candidate availability continues to worsen…
Recruitment agencies signalled a further marked decline in the availability of candidates at the end of the year. The deterioration in permanent labour supply quickened since the previous month, while
short-term staff numbers fell at a softer but still marked rate.
…leading to softer growth in permanent staff appointments
Low candidate supply weighed on permanent staff appointments during December. Though solid, the rate of expansion was the softest seen in 20 months. Contract billings meanwhile rose at a sharper rate, one that picked up from November’s joint 25-month low.
Demand for staff remains robust… 
Vacancies rose for both permanent and contract roles across the UK at the end of 2018. Notably, growth of demand for both types of worker was much stronger than seen on average over the survey’s 21-year history.
…but shrinking staff supply drives pay rates higher
As demand for workers generally outstripped supply, starting pay continued to increase sharply for both permanent and short-term workers in December. The rate of starting salary inflation was among the quickest seen for over three years, while contract pay growth also remained sharp by historical standards.

Staff Appointments

Slowest increase in permanent placements for 20 months
As has been the case in each month since August 2016, the number of people placed into permanent job roles across the UK rose in December. Although solid, the rate of growth eased for the second month in a row to the softest since April 2017. Panellists commonly stated that strong demand for staff and greater efforts to secure suitable candidates quickly supported the latest rise in permanent placements. However, there were widespread reports that candidate shortages hampered overall growth, with some recruiters mentioning that people were nervous to seek out new roles due to Brexit uncertainty.
The South of England saw by far the sharpest increase in permanent staff appointments, while relatively mild expansions were seen across the remaining three English regions.
Sharp rise in contract billings at end of 2018 
Agencies’ contract staff billings continued to increase in December. Notably, the rate of growth quickened from November and was sharper than its historical average. Anecdotal evidence suggested that greater demand for short-term staff predominantly stemmed from rising workloads at clients.
All four monitored English regions registered marked increases in contract billings at the end of 2018, led by the South of England.

Vacancies

Vacancies continue to rise sharply in December
At 60.1, the Report on Jobs Vacancies Index edged up from 60.0 in November and remained well above the neutral 50.0 level. The reading was consistent with a further sharp increase in demand for staff.
Permanent and contract vacancies
The increase in vacancies was broad-based by job category, with data showing marked growth of both permanent and contract positions. Encouragingly, growth of demand for both job types picked up slightly from the previous month to identical, and historically sharp, rates.
Public & private sector vacancies
Vacancies for both private and public sector staff increased further in December. The steepest increases in demand were seen for contract and permanent private sector workers. In the public sector, permanent staff vacancies expanded at a quicker pace, while demand for short-term staff rose at a softer but still solid rate.

Official Data: Job Vacancies
Latest official data from the Office for National Statistics (ONS) indicated that job vacancies rose by 4.8% in the three months to November compared to the same period last year. This followed a 6.0% increase in the three months to October. Overall, the total number of vacancies was at a near-record high of 848,000.

Vacancies by Sector

Permanent vacancies
Accounting & Financial and Engineering were the most in demand categories for permanent staff at the end of 2018. Nonetheless, marked increases in vacancies were also seen across all other monitored sectors.
Contract vacancies
Blue Collar remained at the top of the rankings for contract staff demand during December. Short-term vacancies also rose across all of the other nine monitored categories. The slowest increase was seen for Executive/Professional staff.

Staff Availability

Overall supply of candidates declines at quicker pace
The availability of workers continued to fall sharply at the end of 2018, with the rate of reduction quickening slightly since November. The supply of permanent candidates continued to contract at a steeper rate than for contract staff. While the reduction in permanent worker availability accelerated since the previous month, the drop in short-term staff numbers softened slightly.
Permanent staff supply falls at faster rate
Permanent staff availability deteriorated further at the end of the year, thereby extending the current downward trend to 68 months. Furthermore, the rate of contraction quickened since November and was sharper than seen on average over this period. Recruitment agencies linked the fall to generally tight labour market conditions and a reluctance among workers to change roles due to uncertainties around Brexit. 
The supply of permanent staff fell across all four monitored English regions in December, with the steepest reduction seen in the Midlands.
Availability of short-term workers deteriorates further
Although the number of candidates available for short-term work declined at a softer pace in December, the reduction remained sharp overall. Furthermore, the fall was much quicker than seen on average over the series history. A generally high employment rate and fewer workers from the EU were cited as key factors weighing on contract staff supply.
The Midlands registered the quickest fall in contract worker availability, though historically marked falls were also seen elsewhere.

Pay Pressures

Further steep increase in permanent starters’ pay
UK recruitment consultancies signalled a further rise in permanent starting salaries during December. Panellists widely commented that clients were having to offer higher pay to attract and secure new staff amid a shrinking pool of available workers. Despite edging down further from September’s recent peak, the rate of growth remained sharp and well above the series average.
Marked increases in starting salaries were seen across all four monitored English regions.
Contract pay growth remains historically sharp
Contract wages continued to increase in December and at a rate that was much stronger than its long-run average. This was despite the rate of growth softening from November’s 11-year high. Recruiters reported that a lack of available short-term workers had underpinned the latest increase in contract pay.
All four English regions monitored by the survey registered steep rises in wages, led by the Midlands.

Official Data: UK Average
Data from the Office for National Statistics showed that employee earnings (including bonuses) increased by 3.3% compared to a year ago in the three months to October. This followed a 3.1% rise in the three months to September, and marked the quickest rate of pay growth for ten years.
The stronger increase in earnings was predominantly driven by faster pay growth across the private sector, which strengthened to 3.4%. Nonetheless, the rate of expansion in public sector earnings was among the quickest seen for the past seven years at 2.7%.

Feature: Employment

UK employment rate joint-highest on record
The UK employment rate stood at 75.7% in the three months to October, according to latest data published by the Office for National Statistics (ONS). This is the joint-highest reading since the series began in 1971, and marked a firm recovery since dipping to 70.1% in the aftermath of the global financial crisis.
The employment rate equates to nearly 32.5 million people in work; the highest on record. Broken down by sector, data show that the recovery of the labour market was predominantly driven by job creation across
the private sector. Notably, the number of workers in the private sector has increased from less than 22 million in 2009 to approximately 25.4 million in Q3 2018. Meanwhile, the number of people working in the public
sector has fallen from around 7.3 million in 2009 to just under 7 million in the penultimate quarter of 2018.
Broken down by industry, official data show that Human Health & Social Work Activities (4.3 million) and Wholesale, Retail & Repair of Motor Vehicles (4.2 million) had the greatest number of workers. Education (3.3
million), Manufacturing (2.9 million) and Professional, Scientific & Technical Activities (2.4 million) completed the top five in the employment industry rankings.
In numerical terms, the industry which has seen the biggest increase in workers since the start of 2009 was Professional, Scientific & Technical Activities (which includes architects, engineers and scientific researchers), rising by nearly 600,000. This was closely followed by Human Health & Social Work Activities, which saw the number of people employed rise by approximately 500,000.

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 18 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.