Langley James IT Recruitment Market Review – UK Wide – February 2019
March 21, 2019 . 10:00 am
Key points from the February survey:
– Permanent placements unchanged, but contract billings expand at quicker pace
– Availability of staff continues to worsen
– Vacancy growth at near two and a half year low
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Overall the labour market has been incredibly resilient over the last couple of years as employers have opted to hire more permanent and temporary staff rather than invest in long term productivity gains. However in 2019 Brexit uncertainty is having an opposite and chilling effect on the jobs market, with firms reassessing their level of risk. “With a decision on Brexit now imminent we’re seeing companies freeze or slow the pace of new hires, whilst at the same time the number of people looking to enter the jobs market has declined further. Vacancy growth is now back to the levels we saw around two and a half years ago. “With unemployment at its lowest level since 1975, widespread skills shortages are also cooling the jobs market with the most acute issues to be found in sectors such as IT, engineering, and nursing. This means candidates with the right skills are commanding ever higher premiums and pay growth is now at a 10-year high. This has seen pay outstripping living costs meaning people feel better off. “Once a political decision is made on Brexit we expect a wave of pent-up investment to be released in parallel with a renewed focus on cost reduction. This should result in another busy time for the jobs market later this year.”
Neil Carberry, Recruitment & Employment Confederation chief executive, said:
“The resilience of employers and the British jobs market shines through in today’s Report on Jobs. While numbers are clearly weaker than we have seen over the past few years, the survey suggests businesses are ready to create jobs if the investment environment is right. Recruiters are playing a crucial role in helping their clients fill gaps. As we draw closer to Brexit day, uncertainty and concern has grown, putting the sustainability of positive jobs news at risk. Firms are looking for politicians to find a solution to the current deadlock that gives them the certainty they need to invest and create jobs.”
Permanent placements stagnate in February
After a marginal drop at the start of the year, permanent staff appointments were unchanged in February. The broadly stagnant trend for the year so far contrasts with steep increases through 2018, with some panellists indicating that uncertainty around Brexit and a lack of suitably skilled candidates impacted on hiring. At the same time, contract billings rose at a steeper rate, after increasing only slightly in January.
Candidate availability declines further
A high employment rate across the UK and hesitancy to seek out new roles amid an uncertain outlook led to a further steep drop in overall staff supply in February. Despite easing since January, the deteriorations in both permanent and contract worker availability remained historically sharp.
Vacancies expand at slowest rate for 29 months
Although demand for staff continued to rise markedly, the rate of vacancy growth edged down for the second month running to a near two-and-a-half-year low. Softer increases in demand were signalled for both permanent and contract staff in February.
Pay growth eases but remains marked
Latest data pointed to a further sharp rise in starting salaries, with employers generally having to up pay offers to attract and secure candidates. That said, the latest increase was the softest seen for seven months. Contract wage inflation meanwhile eased to a 13-month low.
Permanent staff appointments stabilise in February
After falling fractionally at the start of 2019, the number of people placed into permanent positions was unchanged in February. Some recruitment consultancies indicated that demand for staff among clients remained strong which helped to lift placements. However, other panellists indicated that candidate shortages and Brexit-related uncertainty had put a brake on staff hiring in February. Notably, the broadly stagnant trend signalled for 2019 so far contrasted with steep increases in permanent placements throughout 2018. On a regional basis, greater permanent staff appointments in London and the South of England helped to offset falls in the Midlands and North of England.
Solid rise in contract billings
After rising only slightly in January, contract billings growth quickened in February. Though solid, the expansion remained notably softer than the average seen over the current 70-month sequence of increases. Recruitment agencies that registered higher billings generally linked this to strong demand for contract workers. Renewed increases in contract billings were seen in London and the North of England, while growth was sustained in the Midlands and the South of England.
Softest rise in vacancies for nearly two-and-a-half years
At 57.2 in February, the Report on Jobs Vacancies Index edged down from 58.9 in January to signal a slower, but still marked, increase in staff demand. Furthermore, the latest expansion in job vacancies was the softest since September 2016.
Permanent and contract vacancies
Demand for both permanent and contract staff remained historically strong in February, despite softening since the start of the year. Notably, growth of permanent vacancies edged down to a 29-month low, while demand for short term staff expanded at the slowest pace since August 2016.
Public & private sector vacancies
Demand for both private and public sector staff increased during February. Sharp increases were seen for both permanent and contract job openings in the private sector. Modest growth of demand was meanwhile seen for permanent and short-term staff in the public sector, following reductions in January.
Official Data: UK Job Vacancies
Official data from the Office for National Statistics (ONS) indicated that the number of vacancies rose to 870,000 in the three months to January; the highest level since records began in 2001. This represented a 5.6% increase (46,000 more vacancies) when compared to the same period a year ago.
Vacancies by Sector
Permanent staff vacancies rose across all ten monitored categories during February. The steepest increase in demand was signalled for permanent IT/Computing workers, while the weakest was registered for Construction staff.
Nursing/Medical/Care topped the rankings for contract staff demand midway through the first quarter. Vacancies also grew across the other categories monitored by the survey, with the exception of Retail.
Overall candidate availability continues to decline
Recruitment agencies signalled a further marked deterioration in the availability of candidates during February, despite the rate of reduction easing to the least marked for 11 months. Underlying data showed that both permanent and contract candidate supplies fell at slightly softer rates.
Permanent worker supply falls sharply
February survey data signalled a sustained drop in the availability of workers to fill permanent job roles in the UK. Despite easing to the weakest in 11 months, the rate of deterioration remained much quicker than the long-run series trend. Anecdotal evidence indicated a high employment rate and a reluctance among workers to change job roles underpinned the latest fall in permanent staff supply. The drop was widespread, with all four monitored English regions noting steep reductions in permanent worker availability.
Further reduction in contract candidate numbers
As has been the case since July 2013, the supply of contract workers declined across the UK in February. The pace of reduction eased slightly from January’s recent record, but was much sharper than that seen on average since the survey began in 1997. On a regional basis, the sharpest fall in contract labour supply was seen in London and the softest in the South of England.
Starting salary inflation remains elevated
Starting salaries awarded to permanent workers continued to increase across the UK during February. Reports from panellists widely mentioned that higher pay offers were required in order to attract and secure candidates. The rate of salary inflation was sharp overall, despite edging down to a seven-month low. The upturn in starting salaries was broad-based across all four monitored English regions and led by London.
Contractor wages rise at slowest rate for just over a year
Contractor wages rose further across the UK midway through the first quarter of 2019. Though sharp, the rate of pay growth eased for the third month running to the slowest since January 2018. A number of panellists linked the rise to a general increase in market rates. Higher short-term pay was signalled for all four English regions monitored by the survey, with the quickest increase seen in 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 3.4% in the final three months of 2018. This was unchanged from the increase seen in the three months to November, and indicated that pay growth is experiencing its best growth patch for over ten years. The past year has shown a marked improvement in pay trends across both the private and public sectors. Growth continued to be led by the private sector, which saw earnings rise by 3.5% in the three months to December. In the public sector, pay rose by 2.8%, with the current sequence of growth the best seen since 2011.
Official Vacancies at Record High
The latest set of labour market data published by the Office for National Statistics (ONS) showed that the number of job vacancies hit a fresh record high in the three months to January. At 870,000, the number of vacancies was up 5.6% from the same period a year ago, to reach the highest level since the series began in early-2001. Official vacancies data has a good relationship with the Report on Jobs Demand for Staff Index, which provides a useful guide to anticipating changes to ONS figures. In recent months, the survey data suggested that growth of demand has cooled slightly, but remained strong overall. A closer look at the official vacancy numbers showed that the Wholesale, Retail and Repair of Motor Vehicles sector had the largest number of unfilled roles (140,000), closely followed by Human Health & Social Work Activities (131,000). Combined with Accommodation & Food Service Activities (93,000) and Professional Scientific & Technical Activities (78,000), these four sectors accounted for just over half of all job vacancies. At the same time, tight labour market conditions meant that there are now far fewer people to fill job roles. The unemployment rate currently stands at 4.0%; its lowest since 1975. Consequently, the ratio of unemployed people to vacancies stood at approximately 1.6, which is the lowest since the vacancy data were first available in early-2001. Low worker availability and strong demand for staff has therefore driven up pay, with the most recent ONS figures showing regular earnings growth at a ten-year high.
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