UK recruitment firms signalled a further shift in hiring preferences from permanent to temporary workers amid lingering economic uncertainty around the outlook and rising costs in April, according to the latest Report on Jobs by the Recruitment and Employment Confederation, S&P Global and KPMG.

The Report showed permanent placements fell for the seventh month in a row, and at the quickest rate since the start of 2021. In contrast, temp billings expanded solidly, with the rate of growth the fastest for seven months.

All four monitored English regions noted lower permanent staff appointments in April, led by London.  The steepest increase in temp billings was in the South of England. The Midlands bucked the wider trend and was the only area to register a reduction.

Claire Warnes, Partner, Skills and Productivity at KPMG UK, said, “The preference for hiring short-term staff continued unabated into April. Businesses remain cautious about committing to permanent hires in the face of ongoing economic uncertainty, which led to the quickest increase in temporary billings for seven months.”

April’s data pointed to a sustained improvement in the availability of candidates. The rate at which labour supply improved quickened slightly on the month but remained modest overall. Underlying data showed that a slightly faster rise in permanent candidate numbers contrasted with a softer upturn in temp staff availability. Recruiters often linked higher staff supply to redundancies and workers looking for better paid roles amid the rising cost of living.

Vacancies continued to increase across both the private and public sectors at the start of the second quarter. Growth of demand for temporary staff improved to similarly sharp rates across both sectors. Permanent staff vacancies meanwhile rose at a quicker rate in the public sector than in the private sector, with the latter seeing the softest upturn in demand for four months.

Permanent vacancies increased in nine of the ten monitored job sectors during April. Engineering topped the rankings, closely followed by Accounting/Financial. Retail was the only category to register a fall in demand. 

Nursing/Medical/Care topped the temporary staff demand league table at the start of the second quarter, followed by Hotel & Catering and Engineering. The only monitored sector to see reduced demand for short-term staff was Retail.

While demand for staff continued to rise in April, the overall rate of vacancy growth slipped to a three-month low and remained weaker than the series long-run average. The softer upturn in demand was largely driven by a slower increase in permanent vacancies, as the number of temp roles increased at a sharper pace.

At the same time, starting salaries for permanent workers continued to rise at a historically sharp pace in April, with the rate of inflation picking up to a four-month high. Meanwhile, temp wage growth improved to its highest level since January. Higher rates of starting pay were frequently attributed to efforts to attract and secure suitably-skilled staff and bumps to pay to reflect the higher cost of living.

Neil Carberry, REC Chief Executive, said, “This data shows how uncertain many employers are feeling right now. The good news is they still need to hire, as growing vacancies show. But firms are hedging their bets. After a better month in March, in April we saw permanent hiring fall back quickly and businesses turn to temps to help them through. London had a particularly difficult month.”

“The picture varies for temporary recruitment too, with REC members reporting weaker demand in some sectors than others as sectors like logistics, driving and food are heavily affected by changing consumer behaviour,” Carberry added. “Taken together, however, there is still plenty of opportunity out there for jobseekers. Wages are rising strongly for both temps and new permanent hires in the face of inflation, even though candidate availability is finally starting to improve.”

“For employers, hiring is unlikely to get easier soon,” Carberry continued. “Those businesses that succeed will have good, long-term strategies for accessing talent from a wide range of sources, including retraining.”