The KPMG and REC, UK Report on Jobs: Midlands survey, compiled by S&P Global, showed that recruitment activity declined at the start of the year as firms were often hesitant to commit to new staff hires amid a weaker economic climate. Notably, permanent placements fell at the steepest rate for two years, while temp billings declined for the fourth time in the past five months.
Candidate shortages also contributed to the drop in hiring activity. Staff availability continued to fall sharply across the region in January, most notably for short-term staff. Competition for scarce workers and efforts to fill vacancies – which rose further in January – led to sustained upturns in starting pay.
The KPMG and REC, UK Report on Jobs: Midlands is compiled by S&P Global from responses to questionnaires sent to around 100 recruitment and employment consultancies in the Midlands.
Stronger decline in permanent staff appointments
The number of people placed into permanent roles across the Midlands fell for the third time in the past four months in January. Notably, the rate of contraction accelerated to a substantial pace that was the quickest recorded for two years. It was also the steepest seen of all four monitored English regions.
Recruiters that posted a fall in permanent placements often linked this to the weak economic climate and candidate shortages.
At the national level, permanent staff appointments fell for the fourth straight month. Though solid, the rate of reduction was the softest seen over this period.
After expanding for the first time in four months in December, billings received from temp staff hires in the Midlands declined in January. Though only modest, the reduction contrasted with increases in temp billings across the three other monitored English regions. Notably, billings rose at the strongest pace since last September across the UK as a whole, albeit one that was modest overall.
Anecdotal evidence indicated that billings for short-term staff fell due to greater caution among clients due to the weaker economic outlook as well as low candidate supply.
Demand for permanent staff in the Midlands continued to rise at the start of the year. The rate of vacancy growth quickened slightly on the month and was sharper than that seen at the national level. That said, the upturn remained softer than the long-run trend.
Temporary job openings also expanded markedly, though growth softened from that seen in December and was below the series average. Nevertheless, the upturn was slightly quicker than that seen across the UK as a whole.
Downturn in temp candidate numbers accelerates
Recruitment consultancies based in the Midlands signalled a sharp and accelerated reduction in temp candidate supply at the start of 2023. Furthermore, the rate of deterioration was the sharpest seen in five months and the quickest of all four monitored English regions.
There were reports that candidates often preferred the stability of permanent roles, while candidate availability was also hampered by skill shortages.
The seasonally adjusted Permanent Staff Availability Index signalled a second successive monthly fall in permanent candidate numbers in the Midlands during January. The rate of decline eased slightly on the month, but remained sharp overall and exceeded the UK-wide trend. Concerns over the economy and job security had reportedly deterred potential job seekers, while Brexit and a low unemployment rate were also cited by recruiters as limiting candidate supply.
The Midlands and the North of England posted the joint-steepest drop in permanent candidate numbers. London was the only monitored English region to see an improvement in permanent candidate supply.
Starting salary inflation slips to 23-month low
Average salaries awarded to newly-placed permanent staff in the Midlands increased further in January, thereby stretching the current sequence of rising pay to 23 months. Though marked overall, the rate of growth eased to the softest seen over this period and was weaker than those seen across the three other monitored English regions.
According to panellists, starting salaries had increased amid efforts to attract candidates and fill vacancies.
Average hourly pay for short-term staff in the Midlands rose for the twenty-sixth month in a row during January. Furthermore, the rate of growth quickened to a five-month high and was slightly stronger than the national average.
Where higher rates of temp pay were registered, recruiters often attributed this to greater competition for scarce workers.
Commenting on the latest survey results, Kate Holt, people consulting partner for KPMG in the Midlands said: “January saw permanent staff appointments fall at the quickest pace in two years, with demand for skilled staff continuing to outpace availability across the Midlands.
“With the cost of living continuing to place upwards pressure on pay, job security causing low candidate supply and employers relying on temporary staff as permanent placements decline again, the jobs market remains volatile.
“Recruiters and employers should be thinking creatively about how to attract and retain permanent hires to bring about stability, including by taking on more apprentices across a range of age groups, and investing in upskilling and reskilling their existing staff.”
Neil Carberry, Chief Executive of the REC, said: “January’s recruitment activity suggests that speculation about a shallower economic downturn may be justified. Temporary pay growth has quickened as supply of short-term workers has fallen sharply. This means the rate of pay growth in the Midlands increased to a five-month high and was stronger than the national average.
“Underpinning a sense of optimism, vacancies increased for both temporary and permanent roles in January. While this will reflect activity that may have been delayed from the autumn, it is another sign of firms feeling confident to hire, even if they are leaning more to temporary hiring than normal in this uncertain environment. That is the power of our temporary work market – it gives us a way to ensure firms can grow and people can build their careers even when the picture is uncertain.
“The need to address the fundamental challenges our labour market faces has not changed with the turning of the year. From skills to tackling economic inactivity, and from immigration to childcare there is much that can be done in partnership with business to help our economy grow and workers to prosper. Ahead of the Budget, the Chancellor should put the people stuff first across the whole of government. Every department has a role to play in getting growth going – and that starts with enabling our labour market.”
