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

July 17, 2019 . 9:06 am

Slowdown in recruitment activity persists in June as market confidence remains subdued

Key points from the June survey:
– Permanent placements decline for fifth time in six months
– Contract billings expand only slightly
– Vacancy growth holds close to multi-year low

Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Brexit stagnation continues to seize up the jobs market as the slowdown in recruitment activity continues. Permanent staff appointments fell again in June, the fourth month in a row, while subdued confidence ensured that growth in temporary billings remained historically weak.
“As we approach the summer holidays, the worry is that vacancy growth – which held close to a multiyear low in June – is unlikely to bounce back as firms take a relatively cautious approach to hiring. Uncertainty is also likely to further dampen staff availability, as candidates are reluctant to change roles at this time. On a sector basis, IT & Computing continued to need more workers while construction and retail saw reduced demand.
“Looking ahead, conditions across the labour market are likely to remain restrained against a backdrop of political and economic uncertainty before companies can start to make more informed decisions on their long-term hiring.”

Neil Carberry, Chief Executive of the Recruitment & Employment Confederation, said:
“The jobs market has slowed a little, but one issue which shows no sign of relenting is the shortage of qualified candidates in some areas.
“Agencies employing temporary workers do all they can to train them to fill these vacancies, but this is made more difficult by the constraints of the apprenticeship levy. It is high time that this policy was reformed.”

Executive Summary

Permanent placements continue to fall modestly
Latest data rounded off a disappointing end to the first half of 2019, with the number of people placed into permanent roles falling for the fifth time in six months. Though modest, the decline still marked a stark contrast to the robust hiring activity we saw through 2018, with a number of panellists blaming the fall on political and economic uncertainty. At the same time, contract staff billings rose only slightly.
Demand for staff rises at subdued pace
Staff vacancies continued to increase during June, though the rate of expansion held close to April’s multi-year low. Demand for contract and permanent staff rose at rates that, though strong, remained weaker than seen on average over the survey’s more than two-decade history. 
Candidate availability drops amid uncertain outlook
The total supply of candidates continued to decline sharply in June. According to panellists, a generally low unemployment rate and a reluctance to change roles due to heightened uncertainty led to the latest drop in candidate numbers. The deterioration in permanent worker availability continued to outpace that seen for contract staff.
Pay pressures remain elevated due to skill shortages
Lower candidate availability continued to push up pay for both permanent and contract workers during June. Permanent starting salaries rose sharply, despite the rate of inflation being among the softest seen for two years, while contract wage inflation quickened to a seven-month high.

Staff Appointments

Permanent staff appointments continue to decline
June survey data indicated that the number of people placed into permanent job roles in the UK fell for the fifth time in the past six months. Though modest and little-changed from May, the contraction contrasted with marked increases in permanent placements through 2018. Reports from panel members indicated that Brexit related uncertainty continued to weigh on hiring decisions. There were also mentions that demand for staff had softened, while low candidate availability had also impacted on recruitment activity.
Permanent staff appointments continued to fall in the Midlands, the South of England and London, but rose in the North of England.
Contract billings growth remains marginal
UK recruitment consultancies signalled a further rise in billings received from the employment of short-term staff during June. Anecdotal evidence indicated that firm demand for contract workers had supported the latest increase in billings. However, the rate of growth was similar to May’s 73-month low and only slight.
On a regional basis, contract billings rose in London and the South of England, but declined in the Midlands and the North of England.

Vacancies

Growth of demand for staff remains close to multi-year low
The Total Vacancies Index remained above the crucial 50.0 no-change value at 54.2 in June, up fractionally from 54.1 in May, to signal a further increase in staff vacancies. Although indicative of a solid expansion, the rate of increase held close to April’s 80-month low.
Permanent and contract vacancies
Vacancies rose at a similarly strong pace for both contract and permanent staff during June. The latest increase in permanent worker demand was the most marked for three months, albeit much weaker than the increases seen during 2018. Meanwhile, short-term staff vacancies rose at the softest pace since August 2012.
Public & private sector vacancies
The private sector continued to outperform the public sector in terms of vacancy growth in June. Demand for both permanent and contract staff in the private sector expanded sharply. Meanwhile, in the public sector, contract job vacancies rose only modestly and demand for permanent workers continued to contract.

Official Data: UK Job Vacancies
Latest official data from the Office for National Statistics (ONS) indicated that the number of job vacancies expanded by 1.5% on an annual basis to reach 837,000 in the three months to May. While the number remained close to the record high of 861,000, job openings have steadily declined over the past four survey periods.

Vacancies by Sector

Permanent vacancies
IT & Computing continued to lead the permanent staff demand rankings during June. A steep increase in vacancies was also seen for Engineering. The only two sectors to register reduced demand were Construction and Retail.
Contract vacancies
Eight of the ten monitored sectors recorded higher demand for short-term staff in June, led by Hotel & Catering and Nursing/Medical/Care. In contrast, contract vacancies fell markedly for Retail workers.

Staff Availability

Overall supply of candidates continues to decline sharply
The Total Staff Availability Index posted below the neutral 50.0 level to signal a deterioration in overall worker supply for the seventy-fourth month running in June. The rate of contraction remained sharp, despite easing slightly since May. Marked reductions were observed for both contract and permanent worker availability, with the latter seeing the steeper rate of decline.
Steep drop in permanent worker availability
Recruitment consultancies signalled a further reduction in the availability of workers to fill permanent jobs in June. Companies often linked the fall to heightened uncertainty towards the outlook, which had led people to become more reluctant to move roles. Others commented that a generally low unemployment rate and skill shortages had weighed on candidate supply. The rate of reduction remained historically sharp, despite easing slightly since May. Permanent candidate numbers continued to fall across all four monitor English regions.
Contract staff supply falls markedly in June
Latest survey data pointed to a sustained drop in short-term staff availability across the UK in June. The rate of deterioration was sharp, despite easing since May, and much quicker than the series long-run average (49.5). Anecdotal evidence indicated that a relatively high employment rate and fewer EU workers had weighed on contract worker supply.
The steepest fall in short-term candidate numbers was seen in London, while the softest was recorded in the North of England.

Pay Pressures

Starting salaries continue to rise sharply 
UK recruitment consultancies signalled higher salaries for permanent starters in June, thereby stretching the current trend to 86 months. Although the rate of inflation was among the softest seen for over two years, it remained sharp overall. According to panel members, competition for scarce staff and skill shortages placed upward pressure on pay. Starting salaries rose across all four English regions, led by the Midlands.
Contract pay inflation quickens to seven-month high
Average hourly wages awarded to contract staff rose for the seventy-seventh month running in June. Candidate shortages were reported by panellists as the principal driver of higher pay. Furthermore, the rate of inflation edged up to the sharpest recorded since November 2018. All four monitored English regions recorded higher wages for contract staff, with the quickest rate of increase seen in the Midlands.

Official Data: UK Average Weekly Earnings
Latest data from the Office for National Statistics showed that employee earnings (including bonuses) increased by 3.1% year-on-year in the three months to April. This followed an increase of 3.3% in the previous three-month period, to indicate a further softening since peaking at 3.5% earlier in the year. That said, the current period of pay growth remains the most marked for approximately a decade.
The softening was predominantly driven by the private sector, which saw pay growth ease to 3.2% over the three months to April compared to a year ago. This offset the quickest increase in public sector earnings for over seven-and-a-half years (3.0%).

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.