Overall candidate availability in the UK continued to decline sharply during March, though the latest reduction was the weakest seen for one year, according to the latest IHS Markit/Recruitment and Employment Confederation Report on Jobs.

The report showed that a softer drop in permanent candidate supply contrasted with a slightly quicker deterioration in short-term staff availability. All five monitored regions noted lower permanent staff availability, with the quickest reduction noted in the South of England. Meanwhile, the decline in short-term staff supply was broad-based by region. The quickest reduction was noted in the Midlands, while the softest was registered in Scotland.

Engineering led the rankings for demand for permanent staff during March, closely followed by IT & Computing. All job categories monitored by the REC and IHS signalled stronger demand for temporary/contract staff in March.

According to the report, March saw further sharp increase in permanent staff placements across the UK, with the pace of expansion edging up fractionally since February. In contrast, temp billings expanded at the weakest pace for over a year.  New client wins, strong demand and rising business requirements were all factors underpinning the latest increase in temp billings. However, the report stated that some recruiters mentioned that a greater preference for permanent workers alongside candidate shortages had weighed on growth.

Staff vacancies continued to rise markedly at the end of the first quarter. This was despite growth of demand easing slightly to the lowest for 15 months, driven by a weaker upturn in temporary staff positions. Permanent staff vacancies continued to rise at a slightly faster pace than that for temporary job roles

Average starting salaries awarded to people placed in permanent jobs rose further in March. The rate of increase was sharp overall, despite softening to a ten-month low. The South of England registered the sharpest increase in starting salaries.

Hourly pay rates for short-term staff increased again in March, thereby extending the current trend to 62 month. According to respondents, reduced candidate availability was a key factor driving up pay. All five monitored UK regions noted higher wages for short-term employees, with the steepest rate of inflation noted in London.

“Permanent placements are growing month on month as demand for staff remains high,” REC Director of policy Tom Hadley, said. “More people are entering employment, but it doesn’t make up for the shortfall of candidates for many roles, from cyber security and aerospace through to sewing machinists and drivers. 

“As a result, employers are increasing starting pay to draw candidates away from current roles into new positions,” Hadley said. “Growth in pay for temporary roles especially is accelerating. In hospitality, demand for temporary staff is really high, but businesses have had fewer applicants from the EU since the Brexit vote. Employers are working hard to make themselves attractive to UK nationals, but they will still need temporary roles to be filled by EU nationals post-Brexit and the government must allow for this.”

“Candidates planning to move jobs have a strong chance of getting a pay rise,” Hadley said. “With inflation outstripping pay growth for over a year now, high pay offers will be tempting, as the pressure on starting salaries still isn’t translating into pay rises for staff who stay put. Employers need to look at other means to keep staff, such as creating a good workplace culture and offering progression opportunities.”