Amid reports of hiring freezes and cost cutting at clients across the UK, permanent placements and temp billings fell in March, according to the latest UK Report on Jobs by the Recruitment and Employment Confederation and KPMG, compiled by S&P Global.

The report also noted increased staff availability in March weighed on pay growth.

Permanent staff appointments in the UK continued to fall in March, extending the current downturn to a year-and-a-half. Recruiters cited an uncertain economic outlook and ongoing recruitment freezes as reasons for the latest decline.

By region, there were reductions in the number of permanent placements across all four monitored English regions in the latest survey period. The sharpest contraction was recorded in the south of England.

By sector, in March, eight out of ten broad sectors covered by the survey experienced a drop in demand for permanent vacancies, the exceptions being engineering and blue collar. The sharpest fall in demand was recorded in the retail category, followed by IT & computing.

Budget constraints also reportedly weighed on temp billings during March, which fell to the steepest degree since July 2020.

The downturn in temporary billings was common across all four English regions, with the steepest decline recorded for London.

Temporary vacancies increased for blue collar, engineering and hotels & catering workers in March, with solid growth rates recorded in each instance. Like permanent vacancies, the steepest downturn in demand for temporary staff was seen for retail.

Meanwhile, starting pay levels for both permanent and temporary workers continued to increase during March. Higher pay generally reflected efforts to attract better candidates. However, amid an upturn in candidate supply, rates of pay growth continued to slide.

Overall, permanent staff salaries rose at the weakest rate in over three years, while for temp wages the increase was the slowest in four months. In both instances, growth rates were also below their respective survey trends.

When it comes to staff demand, the latest data showed that demand for all workers fell for a fifth successive month in March. Although the rate of contraction was softer than in February, it remained historically marked. Permanent staff demand continued to fall at a noticeably faster rate than for temp workers, which again fell only marginally.

Staff availability data showed a rapid and accelerated increase in March. This was the thirteenth successive month of growth, and the latest rise was the steepest recorded since last November. Higher volumes of redundancies and cost cutting at firms reportedly led to an increase in candidate availability. Permanent and temporary staff availability both increased sharply.

Neil Carberry, REC Chief Executive, said, “Economic growth has been side-lined for too long and must be at the heart of this year’s general election campaign. Today’s data shows the economy in a holding pattern waiting for inflation and interest rates to ease, so that firms can get to investing. The decline in permanent placements has been steady for some months now, with temporary recruitment still robust, if falling back from the record highs of 2022/3. Employers appear to be leaning on temporary work while they are uncertain about the path of the economy.”

Jon Holt, chief executive and senior partner of KPMG in the UK, said, “Persistent economic uncertainty has led to many business leaders delaying major investment decisions and relying on savings for growth during the first quarter of the year. But they are optimistic about the outlook improving.”

“And while March’s survey data indicates ongoing weak demand in the labour market with a sharp rise in candidate availability, relatively low levels of UK unemployment together with falling inflation could pave the way for economic recovery,” Holt added.

“There are still headwinds, but it’s time for the UK economy to get its groove back - and UK businesses will be ready when the Bank of England makes its interest rate cuts. This may not lead to an instant rebound, but confidence to invest will increase, improving demand, and the economic outlook should start moving in the right direction,” Holt added.