Hiring activity across the UK in January 2024 saw a fall, particularly in permanent hiring, as businesses cited a subdued economic environment, according to the latest Report on Jobs by the Recruitment and Employment Confederation and KPMG, compiled by S&P Global.

As has been the case since October 2022, the number of people placed into permanent job roles across the UK declined in January, according to the report. According to recruitment agencies, companies had often paused hiring decisions amid caution around the economic outlook. Others noted that fewer job opportunities had supressed hiring activity during January.

The reduction in permanent staff appointments was broad-based across the four English regions monitored by the survey. The steepest rate of contraction was seen in the Midlands, though marked falls were also recorded elsewhere.

Meanwhile, January saw a marginal reduction in billings from temp workers. When adjusted for seasonal influences, the temporary billings index posted below the neutral 50.0 level to signal a decline in temp billings for the third straight month in January. That said, the pace of reduction was the softest seen over this period and only marginal.

Reports from panellists indicated that demand for short-term staff had weakened in the latest survey period. However, some recruiters noted that companies had preferred to use temp workers when filling roles. Higher temp billings in the North and South of England contrasted with declines in the Midlands and London.

Job vacancies in January fell for the fourth time in the past five months. At 49.4 in January, the seasonally adjusted total vacancies index edged up fractionally from 49.3 in December. The reading therefore signalled a marginal fall in demand for staff for the fourth time in the past five months.

Underlying data showed that permanent staff demand fell for the fifth straight month at the start of 2024, albeit slightly. At the same time, temp vacancies expanded at a marginal pace that was the slowest since November 2020.

Staff vacancies increased in the private sector but fell in the public sector during January. The strongest increase in demand was seen for short-term workers in the private sector, though the upturn was only mild overall. In contrast, the quickest decline in job opportunities was signalled for permanent roles in the public sector.

Permanent staff demand fell across just over half of the ten monitored job categories during January. The steepest rates of contraction were seen in the retail, construction and IT & computing sectors. Meanwhile, the strongest rise in vacancies was signalled for nursing/medical/care roles.

Of the five broad employment sectors to see firmer demand for short-term workers, hotel & catering and blue collar saw the steepest rates of vacancy growth overall. At the same time, the quickest drop in temp job opportunities was seen in the retail sector.

When it comes to staff availability, the overall supply of candidates across the UK expanded for the eleventh month running in January.

Recruitment consultancies across the UK registered a softer rise in permanent candidate availability at the start of the year. Though sharp in the context of historical data, the latest upturn was the least pronounced in four months. Where higher candidate numbers were recorded, panel members often linked this to redundancies and a slowdown in hiring activity.

All four monitored English regions saw the availability of permanent workers increase during January, led by London.

At the same time, the report signalled a sustained rise in temporary worker availability in January, thereby stretching the current period of expansion to 11 months. While marked, the rate of growth was the softest seen since last May. There were frequent reports that the improvement in temporary staff availability was due to company layoffs and relatively subdued demand for workers.

The steepest upturn in temp candidate supply was seen in the capital, while the slowest was recorded in the North of England.

When it comes to pay, average salaries awarded to new permanent joiners continued to increase across the UK at the start of 2024. While sharp, the rate of pay growth slipped to the softest since March 2021 and moved further below the historical average (57.4).

The higher cost of living and competition for skilled workers had placed further pressure on starting salaries, according to recruiters. However, there were also reports of tighter client budgets and more stable salaries after a strong period of growth.

When adjusted for seasonal influences, the temporary wages index pointed to an increase in average pay rates for short-term staff for the 35th month in a row in January. Recruiters often mentioned that wages had increased in order to attract and secure suitably-skilled workers amid the higher cost of living.

While solid and the quickest in five months, the rate of pay growth for temp wages was slower than seen on average over the current period of rising wages. All four monitored English regions noted higher temp pay, led by the South of England.

Neil Carberry, REC chief executive, said, “The labour market’s resilience is a great strength of the British economy - but it can’t last for ever without sustained economic growth.”

Jon Holt, chief executive and senior partner of KPMG in the UK, said, "We're starting the year with the labour market remaining tight overall, though we are seeing the number of job seekers increasing as demand softens. The skills gap is part of this story. We know the UK’s ambition is for technology to drive productivity and economic growth, and yet we still face a shortfall in skilled tech talent.”

“If the UK is serious about equipping the workforce for a modern digital economy, we need government and business working together and investing in reskilling and upskilling,” Holt said. “All eyes will now be on the chancellor’s upcoming budget, and while recruiters and businesses would no doubt welcome any further cuts in payroll tax costs, they will also be hoping for a bit of policy stability during an election year.”