Demand for staff falls for first time in over a decade

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    The COVID-19 outbreak has caused a sharp drop in recruitment activity across both the permanent and temporary sectors, according to the latest Report on Jobs published by the Recruitment and Employment Confederation (REC).

    The report showed that in March permanent placements and temp billings both fell at the steepest rates since 2009 in the wake of the financial crisis, as firms cancelled or postponed plans to take on new staff.

    The grinding to a halt of recruitment activity will compound the situation of many contractors who were laid off shortly before the outbreak due to companies introducing policies to adhere to the planned Off-Payroll IR35 reforms.  Many contractors, particularly in the financial services sector, either had their contracts terminated or were told they could only stay if they worked on a PAYE basis, causing an unusually high exodus of contractors from their clients shortly before the coronavirus crisis took hold.  The Off-Payroll legislation has since been postponed for twelve months.

    The panel of around 400 recruitment firms surveyed by the REC said that a combination of the virus and pending IR35 policy changes led to the quickest reduction in temporary billings for eleven years.  Permanent staff placements also declined at the fastest rate since February 2009, after rising for three consecutive months.

    Vacancy numbers also deteriorated in March, with demand for both permanent and temporary staff falling for the first time in over a decade.  Permanent staff vacancies fell at a quicker pace than temporary job openings, but rates of contraction were mild in both cases.  The steepest reduction in temporary vacancies was in the retail and IT sectors.

    “Business is very tough at the moment.  We’ve had several clients just cancel or defer work because of the COVID-19 situation,” a banking recruitment agency told a contractor website.

    “So yes, many projects are being stopped, however the executives [at one major bank we supply] have said they don’t want to be seen to be laying off contractors.”

    The weaker demand for staff led to a softening of pay inflation, which had been relatively high due to record high employment levels in the UK. Contract rates rose at the slowest rate for just over seven years.

    Commenting on the survey results, Neil Carberry, chief executive of the REC, said: 

    “The coronavirus pandemic has put the labour market on pause. It does mean massive disruption in the short term, but we need to remember that this has to be done in order to protect businesses and save lives.

    “What we should be concerned about is how we stop that short-term disruption becoming longer-term economic depression.  To do that we need to maintain employment levels as much as possible.  Businesses in high-cashflow sectors like recruitment and hospitality need to be able to access government support much more quickly than they currently can, or they will not be able to afford to furlough their workers.  This and other measures like government covering statutory sick pay for all firms will help people and firms to stay afloat now, and help the economy bounce back once the crisis is over.”

    James Stewart, vice chair at KPMG, who compile the report in conjunction with the REC, said: “Unsurprisingly, COVID-19 has already impacted the UK jobs market with recruitment activity falling away as uncertainty grips the nation.

    “Firms are cancelling or postponing hiring decisions although, as you would expect, the demand for temporary healthcare professionals and manual labour workers saw a significant uptick.

    “UK business needs to do what it can to adapt and survive this pandemic – and be able to emerge in the best position possible to ramp up once the crisis comes to an end.”

    9th April 2020.