Scottish recruitment firms recorded a second consecutive monthly decline in permanent placements during January while temp billings also fell, according to the latest Royal Bank of Scotland Report on Jobs compiled by S&P Global.

The rate of contraction for permanent placements moderated from December but was sharp overall. Panellists linked the latest reduction to a decrease in business activity and lingering uncertainty over the outlook. Permanent staff appointments also fell at the UK level and at a stronger rate than observed in Scotland.

January survey data also pointed to a fresh fall in temporary billings across Scotland. The latest reduction, which ended a two-month sequence of growth, was the most pronounced since last August. Temp billings also fell across the UK as a whole at the start of 2024. However, the rate of decrease was only slight and notably weaker than seen for Scotland.

Meanwhile, the report recorded a marked deterioration in permanent candidate availability across Scotland in January. This extending the current run of contraction to three years. Moreover, the rate of decrease quickened from the previous survey period to the fastest since December 2022. According to the report, reduced market confidence deterred candidates from seeking new job opportunities.

On the temp staffing side, as recorded in each of the last four months, the availability of temporary candidates across Scotland improved in January. The pace of expansion eased slightly from December but was strong overall.

In terms of pay, while candidate shortages fuelled higher starting salaries in Scotland, the rate of inflation moderated again during January. Furthermore, the rate of pay growth for permanent salaries was the weakest in nearly three years and slower than the historical average.

Temporary wages increased rapidly across Scotland in January, thereby extending the current sequence of growth that began in December 2020. Moreover, the rate of inflation quickened to a nine-month high. The growing cost of living and competition for skilled staff were said to have driven up temp pay.

Permanent staff demand weakened again across Scotland in January. The pace at which vacancies contracted quickened for the fifth straight month to the strongest since November 2020. With the sole exception of nursing/medical/care, all of the eight monitored job sectors recorded a fall in permanent vacancies during January, with executive & professional leading the decline.

At the same time, recruitment consultancies across Scotland recorded a sixth successive monthly reduction in temporary vacancies during January. The downturn was the most pronounced since mid-2020. Of the eight monitored job categories, the quickest decrease in vacancies was recorded in engineering & construction, followed by executive & professional.

Sebastian Burnside, chief economist at Royal Bank of Scotland, said, “The health of the Scottish labour market weakened at the start of the year, with recruitment agencies revealing notable declines for both permanent placements and temp billings. The subdued economic climate, high costs and uncertainty over the year ahead all contributed to muted hiring activity at businesses. Starting salary inflation also moderated again in January, with pay awarded to permanent new joiners rising at the weakest pace in nearly three years."

“The downturn in hiring activity in Scotland reflected the trends seen across the UK as a whole, with many employers pausing recruitment decisions until the economic environment improves and market confidence revives,” Burnside added.