The latest KPMG and REC, UK Report on Jobs: London survey indicated a sustained and marked decline in permanent placements in July.
Temporary billings also fell sharply, and at the fastest rate since February.
The dampened hiring landscape coincided with a further rapid expansion in labour supply, driven by redundancies and a general downturn in market activity.
Furthermore, recruitment firms noted a continued worsening in demand for labour. Both permanent and temporary vacancies fell at an accelerated rate during the latest survey period.
Regarding compensation, permanent salaries awarded to new joiners rose at a mild pace in July, and one of the weakest in the current 53-month trend of inflation. Temporary wages also experienced only a relatively modest rise, with the growth rate similar to those seen in May and June. In both cases, rates of increase were historically subdued.
The KPMG and REC, UK Report on Jobs: London is compiled by S&P Global from responses to questionnaires sent to around 100 recruitment and employment consultancies in London.
Anna Purchas, London Office Senior Partner at KPMG UK, said: “It’s clear that hiring activity in London remains muted, with permanent and temporary placements both falling quite sharply, and our capital is leading the decline for the latter. Employers are understandably cautious right now, as wider market uncertainty impacts confidence.
“We’re also seeing a growing pool of available talent. For businesses ready to invest, there’s a real opportunity to do so quickly in London, with pay pressures easing.”
Downturn in permanent appointments remains marked
The start of the second half of the year indicated a fourth consecutive monthly decline in permanent staff placements across London. The rate of decrease softened but was close to June’s recent high, signalling a marked decline and one which was stronger than the national average. Anecdotal evidence attributed the drop to reduced job availability, extended hiring processes and weak client demand.
All four monitored English regions experienced a decline in permanent placements, with the South of England showing the strongest downturn.
July data indicated a rapid drop in temp billings across the capital, thereby extending the current run of decrease to 19 months. The downturn was the most pronounced since February, with London in fact leading the decline of the four monitored English regions. Poor sales performance with the conversion of some temp roles into long-term positions were reasons cited by surveyed respondents for the latest decrease.
A renewed contraction in the Midlands meant that a universal drop in temp billings was recorded across the four tracked English regions for the first time since April.
The twelfth consecutive monthly drop in permanent vacancies across London was rapid and the most marked since October 2020. Short-term vacancies also fell in July. The rate of reduction here was the fastest in three months and sharp.
In both cases, the rates of decline across London outpaced those seen for the UK as a whole.
The remaining monitored regions in England also noted falling permanent and temp vacancies in July, with the respective seasonally adjusted indices dropping across the board.
Rapid growth in permanent staff availability
July data saw the supply of permanent workers rise across London. The pace of increase was only slightly weaker than seen in the month prior and marked overall. Fewer job opportunities and a reduction in overall market activity leading to redundancies resulted in a higher pool of available candidates, noted surveyed recruiters.
All four monitored English regions indicated an expansion in permanent staff supply, with the North of England leading the increase. Furthermore, it was also the only region to report a stronger month-on-month upturn.
The availability of candidates for temporary vacancies in London expanded further in July. The rate of growth was rapid and faster than the series average, despite easing to a three-month low. Anecdotal evidence highlighted that redundancies and a growing number of workers willing to accept lower rates drove up the supply of candidates.
Of the four tracked English regions, the North of England recorded the steepest expansion in temp staff availability. Moreover, it was the only area where the pace of growth accelerated on the month. Meanwhile, the Midlands registered the weakest uptick, but one which was still rapid overall.
Permanent salary growth eases further
Upward pressure on permanent salaries in London was only mild and historically muted in July. The respective seasonally adjusted index hit one of its lowest levels in the current inflationary period, which began in March 2021. Moreover, for the first time in three months, the rate of growth across London fell below that recorded for the UK as a whole.
The South of England recorded the weakest uptick in permanent starting salaries, with the North posting the strongest rise.
Pay awarded to temporary staff in London rose solidly in July. According to panellists, hourly wages were raised in order to align with higher living costs.
Despite signalling the fastest increase of the four monitored English regions, the rate of inflation across London was broadly unchanged from those seen in May and June and was below the long-run series average. Meanwhile, the South of England was the only area where temp wages fell.
Jon Holt, Group Chief Executive and UK Senior Partner KPMG, said: “It’s clear that hiring activity in London remains muted, with permanent and temporary placements both falling quite sharply, and our capital is leading the decline for the latter.
“Employers are understandably cautious right now, as wider market uncertainty impacts confidence.
“We’re also seeing a growing pool of available talent. For businesses ready to invest, there’s a real opportunity to do so quickly in London, with pay pressures easing.”
Kate Shoesmith, REC Deputy Chief Executive, said: “There is a path to jobs market recovery – but it will take co-ordinated action from Government, the Bank of England and business to maximise on any potential upswing.
“With permanent salary growth easing further in London and a modest rise in temp wages in the city, it suggests it was right to cut interest rates last week. More action like this, to stabilise the business cost-base, is what will support growth and boost the jobs market this year. That is what the Chancellor should be keeping firmly in mind when preparing this year’s Autumn Budget.
“Fluctuations in permanent and temporary job placements in London signal a labour market that remains resilient but uneven. Across the UK, construction, a key economic bellwether, has seen a rise in temp vacancies, an early sign of confidence returning. Demand for blue-collar temp roles and permanent engineering jobs across the country also remains steady, offering another glimmer of optimism.
“At the same time, hiring in retail and hospitality are down in the UK. Employers in these sectors are pausing due to cost pressures and uncertainty around employment law, although when the turn comes, these industries typically rebound quickly.
“Meanwhile, wide-ranging skills shortages remain for permanent and temporary staff, indicates the need for urgent support from government to upskill and retrain people; while businesses need to act now to secure the talent they will require when hiring picks up later this year, as our separate employer sentiment surveys suggest it will.”
