The European temporary employment sector is set to experience a challenging year in 2024, according to ING.

After two years of above-average volume growth for the European temporary employment sector, that growth turned to contraction last year. For 2024, ING expects the freeze on hiring temp workers to continue. Sluggish economic growth and staff shortages are the main challenges for the sector this year.

Economic growth forecasts for most European economies remain weak for 2024, ranging from a mild contraction in Sweden and Germany to a lingering 0.7% GDP growth in Belgium and the Netherlands. As a result, unemployment could rise slightly.

The sluggish economic outlook has consequences for the employment services industry as companies are reluctant to invest now that the market remains highly uncertain. This softens the demand for temporary agency workers.

Staff shortages could slow market volume growth in the temporary employment sector, as temp agencies experience more difficulties recruiting new employees. Based on the job vacancy rate, the labour market is tightest in Belgium and the Netherlands, with 5% of unfilled vacancies in the third quarter of 2023.

ING highlighted that, within the manufacturing sector, new orders continue to decline, as does capacity utilisation. Employment prospects for temp workers are also deteriorating in the services sector. Taken together, market volumes in the employment services sector are expected to decline in most European economies next year.

UK

Economic activity in the UK is expected to grow only modestly in 2024, similar to most other European economies. The sluggish economy will lead to a decrease in the number of vacancies and an increase in the unemployment rate. However, given the ongoing staff shortages, this increase is expected to be limited. ING expects the demand for temporary agency workers to weaken further in 2024.

Belgium

Within Belgium, GDP growth in Belgium is expected to be relatively high at 0.7% in 2024, compared to other European economies. This is mainly due to automatic wage indexation, which means that income increases with the inflation rate (excluding alcohol, tobacco and fuels). 

Higher purchasing power stimulates consumer spending and, thus, economic growth. Nevertheless, higher hourly labour costs will negatively impact labour demand, including the demand for temporary agency workers. ING expects a decline in market volumes in the temporary employment sector in 2024 for Belgium.

France

Meanwhile, in France, economic growth is expected to slow further, from 0.9% in 2023 to 0.6% in 2024. The outlook for both the French services and manufacturing sectors remains bleak. Both sectors are facing lower demand, high inflation and greater uncertainty. In addition, the French labour market is showing the first signs of cooling down, resulting in a rise in unemployment in 2024.

The deterioration of the employment climate is mainly due to the services sector. Because almost half of the temps actually work in the service sector, this will also have a negative impact on the demand for temporary agency workers and the number of hours worked. ING expects a further contraction in employment activities in 2024 in France.

Germany

ING expects a further decline in the volume of employment activities in 2024. Weaker global demand, high interest rates, energy uncertainty and persistently high inflation are hitting the German economy this year. This will have consequences for the demand for temporary agency workers.

Adverse macroeconomic developments are putting pressure on the German automotive industry, an important sector for employment agencies. In addition, production is also declining substantially in other subsectors of the manufacturing industry. Another factor negatively affecting the temporary employment sector is the shortage of temp workers due to demographic developments.

The Netherlands

As a result of a weakening economy, the number of temporary employment hours in the Netherlands is expected to decrease further in 2024. ING anticipates a decrease in the number of temporary agency hours by approximately 5% by 2024, mainly due to continued relatively low economic growth. In manufacturing, temp workers are the first to be laid off due to a rapid decline in production and the number of orders.

A major challenge for the staffing industry in the Netherlands is the impact of stricter regulations, which make agency workers more expensive and less flexible. As a result, other forms of employment contracts become more attractive for hiring companies, such as self-employed professionals.

Sweden

Sweden is among the European economies expected to enter a recession in 2023, mainly due to high inflation and higher interest rates. ING expects economic activity to stagnate this year. There are already signs that the job market is cooling down. As a result, consumer and business confidence remains low. The economic situation is likely to weaken demand for temp workers, especially in the construction and manufacturing sectors. Overall, ING expects market volumes for the temporary employment sector to decline again in 2024.

Switzerland

The Swiss economy became more challenging in 2023 due to high inflation, higher interest rates and weakening global demand. GDP growth is expected to slow from 2.2% in 2022 to around 0.6% in 2023 and 2024. The Swiss manufacturing industry, with a relatively large weight of the cyclical chemical and pharmaceutical sectors, is shrinking. The staffing market is also negatively affected by staff shortages, making it difficult to find suitable candidates. ING expects another year of negative volume growth in employment activities in Switzerland in 2024.

ING also stated that while the economic environment is deteriorating, most employers still have modest hiring intentions as 2024 begins. Most employers in the Netherlands, Belgium and Germany are more optimistic about their hiring plans at the start of this year than they were at the end of 2023. In France, Switzerland and Sweden, hiring plans are weaker for the first quarter of 2024 compared to the end of 2023.

SIA’s Global Staffing Market Estimates and Forecasts were published at the end of November 2023 providing deeper insights on market expectations in 2024 and beyond.