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

June 10, 2019 . 10:00 am

Hiring activity remains muted in May as uncertainty lingers around the outlook


Key points from the May survey:
– Modest decline in permanent staff placements
– Contract billings growth at 73-month low
– Demand for staff rises at historically subdued pace

Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Brexit uncertainty continues to dampen the jobs market as companies kept their recruitment decisions on hold in May. Permanent staff appointments fell at a slightly faster pace than in April, while subdued confidence ensured that growth in temporary billings hit a six-year low.
“Of increasing concern is that uncertainty is feeding through to weaker growth in job vacancies, while the supply of candidates fell sharply as people are becoming more risk averse with regards to switching roles. Relatively muted trends for permanent staff vacancies were seen across the board, with retail, construction and executive/professional hit particularly badly.
“We expect the labour market to remain in stalemate over the summer as the contest for a new Prime Minister kicks off. Companies are unlikely to make any dramatic investment decisions until a new leader is in place and have more insight on the future direction of Brexit.”

Neil Carberry, Chief Executive of the Recruitment & Employment Confederation, said:
“The jobs market is still creating opportunities for those looking for work. With vacancies rising and starting salaries going up sharply, it is worth people talking to recruiters about that next step in their career.
“Overall, though, the survey again shows what uncertainty does to hiring plans, with permanent placements dropping again.”

Executive Summary

Permanent placements fall again in May
The number of people placed into permanent job roles fell for the fourth time in the past five months in May, and at a quicker pace than in April. At the same time, contract billings expanded only marginally, with growth hitting a 73-month low. There were many reports that hiring activity was dampened by uncertainty, but also mentions that demand for staff had weakened compared to earlier in the year.
Vacancy growth holds close to multi-year low
Recruitment agencies signalled a slightly stronger rise in overall vacancies during May, but growth remained close to April’s 80-month low. Although both permanent and  contract job openings rose solidly, rates of increase remained notably weaker than their historical averages.
Uncertainty weighs on candidate supply
Ongoing Brexit-related uncertainty and generally tight labour market conditions were cited as key factors weighing on candidate availability during May. Furthermore, both permanent and contract staff supply declined at faster rates than in April.
Starting salary inflation softens to 25-month low
Although salaries awarded to permanent starters continued to grow sharply in May, the rate of inflation was the least marked for just over two years. In contrast, contract wages increased at the quickest pace for six months. Panellists commonly stated that competition for scarce workers continued to place upward pressure on pay.

Staff Appointments

Modest fall in permanent staff appointments
Recruitment agencies in the UK signalled a further decline in the number of people placed into permanent job roles in May. Permanent placements have now fallen in four of the past five months. The pace of decline was moderate overall, despite quickening since April, and remained softer than March’s recent record. The latest reduction was generally linked to Brexit-related uncertainty, which had reportedly led some firms to postpone hiring decisions, while some panellists also indicated that overall demand for staff had softened from early-2019.
Three of the four monitored English regions registered lower permanent staff appointments, with the Midlands seeing the quickest rate of decline. The North bucked the overall trend and saw a marked increase in permanent placements. 
Contract billings growth weakens to 73-month low
May survey data pointed to a weaker increase in billings received from the employment of contract workers. Notably, the latest expansion was marginal and the slowest seen since the current sequence of growth began in May 2013. According to anecdotal evidence, the upturn was largely driven by relatively firm demand for contract staff. However, there were also reports that subdued vacancy growth and reduced activity at clients had restricted the upturn. Contract billings expanded in the South of England and in London during May. However, a further decline was seen in the Midlands while the North of England registered the first reduction since January.

Vacancies

Demand for staff rises at subdued pace
At 54.2 in May, the Total Vacancies Index was up slightly from April’s 80-month low of 53.6, and signalled a further increase in staff vacancies. Though strong overall, the rate of expansion remained subdued compared to the historical trend.
Permanent and contract vacancies
Growth of demand for contract workers continued to outpace that for permanent staff. Contract staff vacancies rose solidly, despite the rate of expansion easing to a 73-month low. Meanwhile, growth of demand for permanent workers was strong, having picked up from April’s recent low.
Public & private sector vacancies
Vacancy growth continued to be largely driven by the private sector, according to the latest data. Sharp increases in demand were seen for both permanent and contract workers in the private sector during May. In the public sector, contract vacancies rose at a steeper pace, but demand for permanent staff fell for the third month in a row.

Official Data: UK Job Vacancies
Latest official data from the Office for National Statistics (ONS) signalled that the number of job vacancies increased by 3.4% on the year to stand at 846,000 in the three months to April. Although the total number of  vacancies remained close to a record high (861,000), there had been falls in each of the past three survey periods.

Vacancies by Sector

Permanent vacancies 
Demand for permanent staff remained strongest in IT & Computing in May, closely followed by Engineering. The only two monitored sectors to register lower permanent job vacancies were Construction and Retail.
Contract vacancies
Nursing/Medical/Care saw the sharpest increase in contract staff demand during May. A marked expansion in vacancies was also seen for Hotels & Catering. In contrast, demand for contract workers fell in Construction, Retail and Executive/ Professional.

Staff Availability

Sharpest drop in candidate availability for four months
The overall availability of candidates across the UK continued to decline sharply in May. Notably, the rate of reduction quickened to the steepest since January. Broken down by candidate type, the number of people available for permanent work continued to contract at a quicker pace than that seen for contract staff. Nonetheless, respective rates of decline remained much stronger than seen on average over the survey history.
Faster decline in permanent candidate supply
As has been the case for just over six years, the availability of candidates to fill permanent job roles declined in May. Furthermore, the rate of contraction was the sharpest since January and remained much quicker than seen on average over the series history. Panellists frequently linked lower candidate numbers to increased uncertainty regarding the outlook, while generally tight labour market conditions were also cited. All four monitored English regions registered marked reductions in permanent candidate supply, led by the South of England.
Contract candidate numbers fall at quickest rate for three months
Recruitment agencies signalled a further decline in the supply of contract staff during May. The pace of contraction was the sharpest for three months and notably quicker than the long-run series trend. A generally low  unemployment rate and widespread skill shortages were mentioned by a number of panel members, while there were also reports of fewer EU candidates. The reduction was broad-based across all four monitored English regions, with the Midlands noting the steepest drop in contract labour supply.

Pay Pressures

Starting salary inflation edges down to 25-month low
The seasonally adjusted Permanent Salaries Index signalled a further increase in starting pay for permanent workers in May. Though sharp overall, the rate of inflation was the softest seen for just over two years. Candidate shortages and greater competition for staff were commonly linked by panellists to the latest increase in salaries. The North or England recorded the steepest increase in starting pay, while the softest was seen in London.
Strongest increase in contract pay for six months
Recruitment agencies pointed to a further increase in average wages awarded to contract workers in May. Reports from panellists commonly linked the rise to low candidate availability. Notably, the rate of pay growth quickened for the second month in a row and was the fastest seen since last November. Sharp increases in contract pay were seen across all four monitored English regions, with the South seeing the quickest rate of wage inflation.

Official Data: UK Average Weekly Earnings
Latest data from the Office for National Statistics indicated that employee earnings (including bonuses) increased by 3.2% year-on-year over the first quarter of 2019. This was down slightly from the 3.5% growth rates seen over the last three periods. Nonetheless, the rise remained among the strongest seen over the past 10 years. In the private sector, annual growth of earnings softened from 3.7% to 3.1% in the latest period, which was the slowest expansion seen since the three months to August 2018. Meanwhile, public sector pay rose by 2.5% year-on-year, to mark the softest rate of growth since the three months to July 2018.

Feature: Flexible Working

Flexible Working Supports Productivity and Business Growth
Employee needs and expectations are evolving. From freelancers and contractors to temporary and agency workers, the number of atypical workers has increased significantly in the last decade and working in this way is an integral part of many people’s career paths. In the OECD, one in three workers is now in non-standard employment, including one in nine who are on a temporary contract . In the UK, the REC estimates that there are over a million temporary and contract workers on assignment on any given day across the year.
Meanwhile, the ongoing feedback from REC members is that there is growing demand for flexibility amongst candidates. While pay and progression opportunities remain key factors, there has been a marked increase in the number of individuals asking about the working patterns and organisational culture. Flexi-time is the most sought-after way of working as it gives the individual the absolute flexibility on the hours and place of work. Part-time working, jobshare, shifts, staggered hours and compressed hours are some of the other ways in which employers can provide flexibility to their staff.
Nonetheless, according to the Timewise flexible jobs index1, the proportion of jobs with an annual FTE salary of £20,000 or higher that were advertised as being open to flexibility stood at 11.1% in 2018. This was inversely proportionate to the nine in 10 employees that demand flexible work.
Encouragingly, UK business leaders are increasingly recognising the importance of flexibility at the workplace as a means to boost productivity. In a survey of 400 employers conducted in March and April 2019, more than half of respondents (56%) reported their business plans to offer more flexible working practices in 2019 in order to increase productivity. This, combined with plans to offer training and upskilling opportunities to staff (82% intend to implement) and to actively promote inclusion and diversity at the workplace (69%), highlights the significant number of business leaders who recognise the importance of investing in their workforce.
Amid mounting skills shortages, good recruitment practices will help unlock the potential of talented people who wish to work flexibly. Offering flexible working helps attract and retain the best and brightest talent. In turn, building a flexible and agile workforce leads to higher levels of productivity.

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.