Langley James IT Recruitment Market Review – UK Wide – March 2019
April 24, 2019 . 1:17 pm
Key points from the March survey:
– Permanent placements fall at quickest pace since July 2016
– Vacancies increase at slowest rate since August 2016
– Availability of candidates continues to decline sharply
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Brexit has been sapping business confidence for months, and now it is causing the jobs market to grind to a halt. With unclear trading conditions ahead, many companies have decided to hit the pause button on new
hires and reduce their dependency on temporary appointments. “At the same time we are seeing a flight to safety in the candidate market. Applicant availability has fallen sharply, with the majority of people looking to switch-up or develop their careers concluding now isn’t the right time to abandon the haven of an existing job. The consequence of a sluggish jobs market is a drag on the economy – with poor candidate availability impeding business growth and hampering restructuring efforts. “IT recruitment has been slowing for months, but now we’re seeing particularly sharp falls in recruitment activity across financial and professional services. Economic bellwether sectors like retail, construction, hotels and catering are also seeing steep falls in recruitment activity. This along with signs that pay growth is cooling will concern UK economists and investors.”
Neil Carberry, Recruitment & Employment Confederation Chief Executive, said:
“We have a fantastic labour market that has delivered high employment and flexibility for workers because it helps companies meet their needs easily. It’s a British success story. But Brexit uncertainty has put the brakes
“With business investment rates poor, and little certainty about the path ahead, today’s data shows that the time for political game-playing is over – this situation is beginning to affect people’s daily lives as permanent staff appointments fell, and the growth of temporary jobs and starting salaries weakened.”
Permanent placements fall at quickest rate since mid-2016
Recruitment consultancies signalled a renewed drop in permanent staff appointments amid heightened uncertainty towards the outlook and reports of delayed decision making. Though modest, the rate of reduction was the fastest seen since July 2016. Contract billings meanwhile expanded at the second-slowest rate for two-and-a-half years.
Vacancy growth cools to 31-month low
Although still indicative of a strong rise in overall demand for staff, the index measuring vacancies edged down again in March. Notably, demand for workers increased at the softest pace since August 2016, with both permanent and short-term vacancies rising at slower rates.
Candidate supply continues to decline
The availability of both permanent and contract staff continued to fall markedly at the end of the first quarter. Recruiters commonly linked the fall to a reluctance among candidates to move roles amid Brexit-related
uncertainty, and a generally low unemployment rate across the UK.
Pay growth softens but remains marked
A combination of lower candidate availability and strong demand for staff led to further increases in pay. That said, rates of pay growth softened since February. The latest increase in starting salaries, though sharp, was the slowest recorded for just under two years. Meanwhile, contract pay growth was the least marked since March 2017.
Permanent placements decline at quickest rate since July 2016
Latest survey data signalled that permanent staff appointments across the UK fell for the second time in three months in March. According to panellists, the biggest factor weighing on hiring was Brexit-related uncertainty, which had reportedly led to recruitment freezes and delays to decision making. Candidate shortages were also cited as having dampened permanent staff appointments at the end of the first quarter. Though modest overall, the latest reduction was the quickest since the aftermath of the Brexit referendum result in July 2016.
Regional data showed that permanent staff appointments declined in the Midlands, London and the South of England. Meanwhile, the North of England signalled a modest expansion.
Contract billings expand at softer pace
Recruitment consultancies signalled a softer rise in billings received from the employment of contract workers in March. Notably, the rate of expansion was modest and the second weakest in two-and-a-half years (after January 2019). Growth was generally linked to relatively strong demand for contract workers, while there were also reports of greater usage of contract staff due to low availability of permanent workers. At the same same time, some respondents mentioned that an uncertain outlook had dampened hiring plans. The North of England registered a marked rise in contract billings, while softer increases were seen in London and the Midlands. In contrast, the South of England saw a renewed reduction.
Demand for staff rises at slowest pace since August 2016
The Report on Jobs Vacancies Index posted above the neutral 50.0 level, at 55.5 in March, to signal a further strong increase in staff vacancies. That said, the reading was down from 57.0 in February to its lowest level since August 2016.
Permanent and contract vacancies
March survey data pointed to softer increases in demand for both permanent and contract staff. Although vacancies continued to rise strongly in both categories, the respective indices fell to their lowest levels in 31 months. Furthermore, growth of demand for both types of staff remained below their long-run trends.
Public & private sector vacancies
Data showed a relatively weak picture for public staff demand compared to the private sector. Demand for both permanent and contract workers in the private sector continued to rise strongly in March, albeit at weaker rates than seen in February. In contrast, permanent public sector vacancies declined solidly, while contract worker demand in the sector rose only slightly.
Official Data: UK Job Vacancies
Official data from the Office for National Statistics (ONS) showed that job vacancies were up 4.8% on an annual basis in the three months to February. This translated into 39,000 more roles compared to a year ago, to leave the total number of vacancies at 854,000. However, this was down slightly from 863,000 in the previous three-month period.
Vacancies by Sector
IT & Computing and Engineering topped the rankings for permanent staff demand at the end of the first quarter. Increased vacancies were also seen across the other monitored sectors, with the exception of Retail.
Nursing/Medical/Care saw by far the strongest increase in demand for contract workers during March, with Hotel & Catering in second place. However, Executive & Professional and Retail both saw contract vacancies fall in the latest survey period.
Supply of workers continues to decline sharply
The availability of candidates continued to fall sharply in March, with the rate of contraction quickening slightly since February. Notably, the pace of reduction remained much quicker than the long-run series trend.
Data split by worker type indicated that the supply of permanent workers continued to drop at a steeper rate than that seen for contract staff.
Permanent worker supply falls sharply
Permanent staff supply deteriorated further in March. The rate of reduction accelerated slightly since the previous month and remained historically sharp. Notably, the current period of worsening permanent worker availability, which is just shy of six years, is the longest seen in the survey’s twenty-one-and-a-half-year history. An uncertain political and economic outlook had been the main factor weighing on candidate numbers in March, according to recruiters. Sharp falls in permanent staff availability were seen across all four monitored English regions.
Softer, but still steep, reduction in contract candidate numbers
Latest data signalled a further marked drop in the availability of staff to fulfil contract roles at the end of the first quarter. This was despite the rate of contraction easing to the weakest since January 2017. Brexit-related uncertainty, fewer EU workers and a generally high employment rate were all cited as having reduced contract staff numbers. All four monitored English regions noted marked falls in the availability of short-term workers, led by the North of England.
Starting salary inflation edges down to near two-year low
Average starting salaries for candidates placed in permanent roles continued to rise sharply in March. According to anecdotal evidence, competition for candidates with scarce skill sets drove the latest increase in starting pay. That said, the rate of inflation cooled for the second month running, and was the softest seen since April 2017. On a regional basis, slower (but still strong) increases in starting salaries were posted for all four English regions.
Softest increase in contract wages since March 2017
Hourly rates of pay for staff in contract employment rose further at the end of the first quarter. Though solid, the rate of increase weakened for the fourth month running and was the slowest recorded for exactly two years. A number of respondents commented that wages rose in line with general market rates. While contract pay increased in the Midlands, the North and South of England, London registered broadly stagnant hourly wage rates.
Official Data: UK Average Weekly Earnings
Data from the Office for National Statistics indicated that annual growth of employee earnings (including bonuses) remained strong, rising by 3.4% in the three months to January. This was only slightly softer than the rate of increase seen in the final three months of 2018 (3.5%), and sustained the strongest period of pay growth seen for over ten years. Private sector pay continued to increase at a faster pace than public sector earnings (3.6% versus 2.8%), but trends in both sectors have improved notably in the past couple of years.
Feature: Business Outlook
Uncertain outlook drives sentiment to lowest since 2009
The latest IHS Markit UK Business Outlook survey, a tri-annual survey which asks 1,200 UK firms about their prospects for the next year, revealed that private sector firms were the least upbeat about their forecasts for growth since the composite index was first compiled in October 2009.
Heightened uncertainty regarding the future relationship of the UK and EU was the biggest factor weighing on private sector companies’ expectations regarding future activity, and subsequently employment, at the start of 2019.
Notably, the net balance of companies anticipating output to expand over the next year fell for the third survey period in a row to a record-low of just +28% in February. As a result, companies also pared back their hiring plans at the start of the year. A net balance of +14% of businesses expected to raise their staffing levels over the next 12 months. This was down from +15% in the previous survey period, and the lowest reading for six years.
At +16%, the net balance of manufacturers anticipating to expand their payrolls slipped to the lowest since early-2013. The marked drop in sentiment at goods producers also coincided with increased concerns about the global economic outlook and softer demand in key exports markets. Meanwhile, confidence regarding future hiring at services companies was stuck at a six-year low (net balance at +13%).
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