The rate of growth of recruitment agencies’ temporary and contract billings fell to a seventy-five month low in July, according to the latest Report On Jobs, compiled by KPMG and the Recruitment and Employment Confederation (REC).
Temporary vacancies also expanded at the slowest rate for seven years, mainly due to the first fall in demand for short-term staff in the public sector since January. Demand for temporary staff in the private sector rose sharply, however. That means, for those who are looking to work as a contractor, the demand for independent contractor jobs and contracting work overall is on a rise.
Permanent recruitment has suffered recently, due mainly to two key factors: the permanent employment rate, and uncertainty over how Britain’s departure from the European Union will affect the UK economy. Unemployment is at its lowest rate since 1974, and with workers reluctant to change jobs until the form that Brexit will take becomes clearer, the number of available candidates looking for permanent roles has contracted, pushing up starting salaries and also increasing demand for contingent workers, including contractors, contracting work & experience.
The recent change of Prime Minister has done nothing to calm concerns over Brexit – instead, a cliff-edge exit is now firmly on the table, and looking like a probable outcome. The further increase in uncertainty has caused a sudden drop in the value of the pound to a two-year low, and on Friday the Office of National Statistics (ONS) announced arguably the most shocking economic warning indicator since the 2016 referendum – a contraction in the UK economy, with gross domestic product (GDP) falling at a quarterly rate of 0.2 percent in the three months to June – the first fall in GDP for six and a half years. A recession is defined as two consecutive quarters’ negative growth rate.
The slowdown in the rate of growth of contractor billings could be attributed to a reduction in investment by businesses who want to delay certain decisions until after the EU departure date of 31st October.
Permanent staff appointments continued to decline in July for the fifth month in a row, albeit marginally. The recruitment agencies & businesses surveyed by the REC blamed conservative recruitment activity on lingering political and economic uncertainty.
Commenting on the survey, which is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment consultancies & agencies, REC chief executive Neil Carberry said: “Our flexible jobs market remains a key strength for the UK as we navigate an uncertain time. While we are seeing a concerning weaker trend in permanent placements bed in, the rate of change is slow, employment rates are high and starting salaries are growing.
“Businesses will be looking to politicians for a pragmatic way forward to help them turn this around – not just on Brexit, but on domestic policies too.
“The new government should be focused on delivering the negotiated exit from the EU businesses need, but also on avoiding damaging changes that will undermine the strength of our jobs market. An improved approach to immigration, reforms to the apprenticeship levy and avoiding hasty changes to contractor tax rules should be top of the list.
“In difficult times such as these, recruitment specialists are an invaluable source of local and industry expertise to businesses looking to hire new staff. The REC is helping its members to do this with our new, local workforce intelligence data, so that they can continue to provide employers with the right people to grow their business.”
James Stewart, vice chair at KPMG, said: “Businesses continue to take a cautious approach to hiring as Brexit and economic uncertainty linger.
“Permanent staff appointments have fallen for the fifth month in a row, while overall demand remains lacklustre as firms delay recruitment decisions. Uncertainty is also impacting the supply of labour, as people are choosing to sit tight until the outlook is clearer.
“With the UK unemployment rate already at a four-decade low, candidate shortages in the labour market continued to push up rates of starting pay. This will likely cause concern for businesses looking to control their costs and recruit the right people for the long term. Ultimately, businesses will be eager to see a Brexit breakthrough in Westminster to help re-establish market confidence on hiring and investment.”
9th August 2019.
