While recruitment consultancies in the UK reported a further decline in hiring activity at the end of 2023, both permanent placements and temp billings fell at softer rates than seen in November, according to the latest Report on Jobs by the Recruitment and Employment Confederation and KPMG.

The report, compiled by S&P Global, noted that panel members often mentioned that muted demand for staff and recruitment freezes amid the weak economic climate had weighed on hiring decisions.

Adjusted for seasonal influences, the permanent placements index pointed to a reduction in permanent staff appointments across the UK for the fifteenth straight month in December. While the rate of decline softened from November, it was nevertheless solid overall and stood in marked contrast to the long-run survey trend of rising placements.

All four monitored English regions noted a decline in permanent staff appointments at the end of the year, with the Midlands recording the sharpest pace of contraction.

Temp billings declined for the second successive month in December. There were a number of reports of employers reducing their usage of short-term staff, often due to cost considerations and lower activity levels. The rate of contraction was modest, however, having eased since November.

Trends for temp billings continued to diverge on a regional basis. While the North of England and London recorded higher temp billings at the end of the year, declines were seen in the South of England and the Midlands.

In terms of vacancies, the seasonally adjusted Total Vacancies Index posted 49.3 in December, slightly up from the 49.2 in November and pointing to a further marginal reduction in overall demand for workers. Vacancies have now fallen in three of the past four months.

Permanent staff vacancies across the UK fell for the fourth month running in December. That said, the rate of decline remained only slight. Demand for temporary workers meanwhile rose at the weakest pace in just over three years and only marginally.

Demand for permanent staff increased in the public sector during December but fell further in the private sector. Notably, this marked the first rise in public sector permanent vacancies for four months.

In contrast, demand for temporary workers continued to increase across the private sector at the end of 2023, albeit at a softer pace. Short-term vacancies meanwhile continued to contract slightly in the public sector.

Four of the ten monitored employment categories registered greater demand for permanent workers during December, led by nursing/medical/care. The fastest falls in permanent vacancies were meanwhile seen in the construction and IT & computing sectors.

Hotel & catering saw by far the steepest increase in short-term vacancies of the six categories to see improvements in demand at the end of the year. The construction and retail categories meanwhile recorded the sharpest declines in demand for temporary workers.

In terms of staff availability, at 59.7 in December, the seasonally adjusted Total Staff Availability Index slipped from a near three-year high of 61.9 in November, but nevertheless signalled a further sharp rise in overall candidate numbers across the UK. The supply of workers has now expanded in each of the past ten months.

The availability of both permanent and temporary staff improved markedly in December, albeit with rates of growth softening from November in both cases.

Having expanded at the quickest rate for nearly three years in November, the respective seasonally adjusted index signalled a softer rise in permanent candidate numbers in December. That said, growth remained sharp overall and among the quickest seen since 2009 when excluding the pandemic period.

Redundancies were cited as the key driver of higher permanent staff supply. There were also reports that lower levels of hiring activity had increased the pool of available workers.

Permanent candidate numbers increased sharply across all four monitored English regions except for the North of England, which saw a slight drop.

The Report on Jobs also noted that where higher temp labour supply was recorded, panel members often cited company layoffs and fewer projects at clients. While not as sharp as that seen in November, the rate at which temp worker availability increased remained sharp overall. London registered the fastest increase in temp candidate numbers at the end of the year, while the Midlands recorded the softest.

The seasonally adjusted Permanent Salaries Index registered above the neutral 50.0 threshold, to signal a sustained rise in salaries awarded to newly-placed permanent staff across the UK in December.

Although sharp and quicker than November's 32-month low, the rate of pay growth was nevertheless the second-softest seen since March 2021. Recruiters often mentioned that competition for suitably-skilled workers continued to push up pay. However, there were reports that salary inflation was dampened by budgetary pressures at clients.

Recruitment consultancies across the UK recorded a further uptick in average hourly wages for temp staff at the end of 2023. The rate of pay growth was the quickest see since August and solid, albeit slightly softer than the historical average. The higher cost of living and shortages of suitably-skilled workers had placed further upward pressure on wages, according to the report. All four monitored English areas registered increases in temp pay in December, led by the Midlands.

Neil Carberry, REC Chief Executive, said, “The slowdown in our labour market seems to be easing a bit. Given that December is a time when employers generally postpone activity into the new year, this is a positive sign that the labour market is weathering the current economic storm.”

“Recruiters went into 2024 with hope that an upturn is coming, based on feedback from clients,” Carberry said. “Driving this economic growth would be a huge benefit for us all, leading to more successful firms, higher pay, and the ability to cut taxes and fund public services. But the growth must come first.”

Justine Andrew, Partner and Head of Education, Skills and Productivity at KPMG UK, said, “It’s a muted end to the year for the labour market, which despite some loosening during 2023, continues to be tight. While the data for December shows hiring activity for both permanent and temporary roles fell at a softer rate than the previous month, businesses are still making redundancies and pausing hiring due to a lacklustre economic outlook. This has driven a further decline in permanent job opportunities, while we continue to see a rising number of people looking for new work.”

“For those lucky enough to start a new role there was another sharp increase in starting salaries due to competition for skilled workers,” Andrew said. “But the rise wasn’t as high as those seen in recent months as businesses face ongoing pressure on their budgets.”

“Recruiters tell us this pressure is now impacting temporary contracts, with fewer people employed on a short-term basis,” Andrew added. “Businesses which successfully planned and managed their workforce through the intense Christmas period will be breathing a sigh of relief and hoping 2024 brings some much needed certainty to boost the UK economy and overall productivity.”