Langley James IT Recruitment Market Review – UK Wide – January 2019
February 18, 2019 . 12:45 pm
Key points from the January survey:
– Permanent placements fall for first time in two-and-a-half-years
– Vacancy growth edges down to 27-month low
– Sharper fall in candidate availability leads to further increases in starting pay
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“With Brexit just days away now, it’s definitely a nervous time for recruiters. January marked the first fall in permanent staff appointments since the referendum and we’ve seen a sharp decline in the number of
candidates entering the jobs market. This is pushing up starting salaries at historically strong rates.
“Both employers and employees are in ‘wait and see mode’ now and there is little reason to believe the brakes will come off the jobs market before we find out what sort of Brexit the UK is about to experience.
“The majority of sectors across the UK economy are now more cautious, and hiring more slowly than they were 12 months ago. Indeed, the retail sector is actually shedding permanent staff.
“Nationally the number of permanent staff appointments has fallen considerably in the North region, Midlands region and London. The exception is the Southern region where the number of permanent staff appointments continues to grow, albeit more slowly.”
Neil Carberry, Recruitment & Employment Confederation Chief Executive, said:
“This is the first month since July 2016 where permanent placement numbers have dropped, with weaker – but still positive – performance for temporary roles, and the lowest rate of vacancy growth for over two years. But we should be careful not to overreact – employment rates are high, and the performance of our labour market overall is still strong. That said, the survey results are a sharp reminder to politicians in Westminster and in Brussels of the need to provide businesses with clarity about the path ahead, so they can invest with confidence.”
Renewed fall in permanent placements…
Recruitment consultants registered the first drop in permanent staff appointments for two-and-a-half years in January amid concerns over Brexit and a further deterioration in candidate availability. Contract billings meanwhile rose at the joint-slowest pace in the current 69-month sequence of growth.
…as staff vacancies expand at softer pace
Although demand for staff remained strong at the start of 2019, overall vacancies increased at the slowest pace for 27 months. Notably, softer increases in demand were signalled for both permanent and contract
workers in January.
Candidate supply falls at quickest pace for 20 months
The number of people available to take up new roles continued to decline sharply in January. Shrinking labour supply was often linked to high employment in the UK, as well as hesitancy among potential
candidates to move roles amid Brexit-related uncertainty.
Pay pressures remain historically sharp
With vacancies rising and labour supply falling further, starting pay continued to increase sharply in January. Notably, permanent starters’ salaries and contract wages both rose at historically strong rates.
Permanent placements fall for first time in two-and-a-half years
Recruitment consultancies signalled a renewed fall in the number of people placed into permanent jobs at the start of 2019. Though only slight, it was the first time that permanent staff appointments had declined since July 2016. There were a number of reports that companies were becoming increasingly hesitant to take on new staff due to uncertainty surrounding Brexit. At the same time, panellists also indicated that shortages of candidates had dampened placement numbers. Data split by English regions showed that permanent placements fell in the Midlands, the North of England and London, with modest growth evident in the South of England.
Contract billings increase at joint-slowest pace for 69 months
Recruitment consultancies signalled a much slower increase in billings received from the employment of contract staff during January. Notably the pace of expansion was the joint-weakest recorded since the current period of expansion began in May 2013 (on a par with September 2015). Panellists that registered higher contract billings generally commented on increased activity at clients. However, some recruitment agencies mentioned that uncertainty regarding the outlook and a general slowdown in market conditions had dampened the overall rate of growth. Contract billings increased in the Midlands and the South of England, but fell in the North of England and London.
Growth of demand for staff slips to 27-month low
The Report on Jobs Vacancies Index slipped from 60.0 to 59.2 at the start of 2019. Although the index continued to signal a steep increase in total job vacancies, the pace of expansion was the least marked since October 2016.
Permanent and contract vacancies
January data showed that demand for staff continued to increase sharply for both permanent and contract workers. However, growth of job vacancies softened to 27-month lows in both cases.
Public & private sector vacancies
A softer rise in demand for staff in the private sector occurred alongside a renewed fall in public sector job vacancies during January. In the private sector, growth of demand for permanent and contract workers edged down to a 29- and 72-month low, respectively. Meanwhile, vacancies fell marginally for both permanent and contract public sector staff.
Official Data: UK Job Vacancies
Latest official data from the Office for National Statistics (ONS) showed that the number of job vacancies rose to the joint-highest level on record in the three months to December. Overall, there were 853,000 vacancies (equal to that registered in the three months to October), which marked a 4.8% increase compared to the same quarter in 2017.
Vacancies by Sector
The steepest increase in permanent staff demand was seen for Accounting/Financial, followed by Engineering and IT & Computing. The only sector to register lower permanent job vacancies was Retail.
Hotel & Catering topped the league table for demand for contract staff in January, closely followed by Nursing/Medical/Care. Vacancies also rose across all other job sectors, with the weakest expansion seen in Retail.
Total staff availability falls at quickest rate since May 2017
The overall supply of available workers continued to decline across the UK at the start of 2019, with the rate of deterioration accelerating to a 20-month record. Steeper falls in candidate availability were seen for both permanent and contract workers. As has been the case throughout the five-and-a-half year period of broad-based contraction, permanent staff numbers deteriorated at a quicker pace than that seen for contract workers.
Sharper fall in permanent candidate supply
The availability of workers to fill permanent job roles declined again in January, thereby extending a trend that has been apparent since May 2013. Notably, the rate of deterioration accelerated to the quickest seen for 20 months. Panellists widely linked the fall to a combination of a high employment rate and a reluctance among workers to move jobs amid Brexit uncertainty. Sharp reductions in permanent labour supply were seen across all four monitored English regions, led by London.
Contract worker availability deteriorates at quicker pace
The availability of short-term workers also fell at a quicker pace at the start of the year. The latest reduction was the most marked seen for 14 months, and much quicker than seen on average over the series two-decade history. Recruitment consultancies commonly cited skill shortages and fewer candidates in the market due to concerns over the outcome of Brexit negotiations. The supply of contract staff fell markedly across all English regions monitored by the survey. The steepest reduction was seen in the Midlands.
Starting salaries continue to rise sharply at start of 2019
As has been the case since May 2012, salaries awarded to permanent starters continued to increase during January. According to panellists, firms were having to increase their offers due to candidate shortages and competition for workers. Furthermore, the rate of pay growth quickened to a three-month high and remained sharper than the series average. Marked increases in pay were seen across all four monitored English regions.
Contract pay growth remains historically sharp
January survey data signalled a further steep increase in wages for contract workers. This was despite the rate of inflation slipping further from November’s 11-year high. Recruiters indicated that candidate shortages had driven up pay rates at the start of the year. The sharpest increase in short-term pay was seen in the South of England, while the softest (but still marked) rise was 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 three months to November. This was up from a 3.3% increase in the three months to October, and the fastest rate of growth seen for over 10 years. Improved pay trends were seen across both the private and public sectors in recent months. Private sector earnings rose 3.5% in the latest three-month period, the joint-strongest rise since mid-2015. At the same time, public sector pay is experiencing its best run of growth since 2011, and increased by 2.7% in the three months to November.
Recent earnings data published by the Office for National Statistics (ONS) showed that pay trends improved markedly across the UK during 2018. Notably, average earnings (excluding bonuses) rose by 3.3% year-on-year in the three months to November, to indicate the strongest period of pay growth for ten years. Including bonuses, earnings grew by 3.4% over the same period, which was the highest for just over a decade.
The improvement in the official earnings data was signalled in advance by stronger pay trends recorded by the UK Report on Jobs survey permanent salaries index (please see chart). Pay pressures have intensified over the past couple of years due to tighter labour market conditions, as demand for staff has outstripped supply.
More recent Report on Jobs data hint that official pay growth may accelerate further, which is a welcome development given the lack of strong and sustained increases in pay since the global financial crisis.
At the same time, the squeeze on household income has subsided, as increases in living costs have softened in recent months. The latest Consumer Prices Index data from the ONS show a 2.1% annual increase in average living costs in December. This was the lowest figure for nearly two years, largely due to reduced fuel and air travel prices, and only slightly above the central bank’s target of 2.0%.
Notably, in real terms, regular pay (excluding bonuses) increased by 1.1% and total pay (including bonuses) rose by 1.2% in the three months to November on an annual basis; the highest figures for both measures in two years.
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