Staff placements in the UK fell in February amid ongoing economic uncertainty with falls in permanent placements and temp billings, according to the latest Report on Jobs by the Recruitment and Employment Confederation and KPMG in association with S&P Global.

The seasonally adjusted Permanent Placements Index signalled a reduction in permanent staff appointments across the UK for the seventeenth month running in February. The rate of contraction was little-changed from that seen at the start of 2024 and sharp. Around 40% of recruiters noted lower permanent staff appointments in the latest survey period, while 26% saw an increase. The latest drop in placements was generally linked to recruitment freezes, delays around hiring decisions, and a drop in vacancies amid the weaker economic outlook.

All four monitored English regions noted lower permanent placements midway through the opening quarter of the year, with London seeing the sharpest drop overall.

February survey data signalled a marked and accelerated decline in billings received from the employment of short-term staff. The rate of reduction was the steepest recorded since July 2020. Recruiters often mentioned that a slowdown in temp staff hiring and tighter employer budgets had impacted billings over the latest survey period.

Among regions, the Midlands was the only monitored English area to register an increase in temp billings during February. The quickest reduction was meanwhile seen in the capital.

Meanwhile, demand for staff fell at the quickest rate since January 2021. The seasonally adjusted Total Vacancies Index fell from 49.4 at the start of 2024 to 46.9 in February, to signal a drop in overall demand for workers for the fourth straight month.

The decline in demand for permanent staff gathered pace in February, with permanent vacancies falling at the quickest rate in just over three years. At the same time, temporary job opportunities fell for the first time since August 2020, albeit marginally.

February survey data indicated that demand weakened for both permanent and temporary staff in the private sector following mild upturns in January. Permanent vacancies meanwhile continued to fall sharply in the public sector. However, demand for short-term staff in the public sector stabilised.

By sector, eight of the ten broad employment categories during February saw lower demand for permanent workers. The retail and executive/professional sectors noted the steepest rates of contraction. Engineering and nursing/medical/care meanwhile saw vacancies increase.

In the temporary workforce, the retail and construction sectors led the downturn in demand for temporary workers midway through the opening quarter of the year. Of the ten surveyed job categories, only blue-collar and engineering noted increases in demand for short-term staff during February.

When it comes to staff availability, the seasonally adjusted total staff availability index posted 57.3 in February, down slightly from 57.5 in January, but still above the neutral 50.0 level to signal a sharp rate of growth. Overall candidate numbers have now risen in each of the past 12 months, though the latest upturn was the least pronounced since last September.

Underlying data indicated that a marginally softer rise in permanent candidate numbers offset a quicker increase in temp worker supply.

The Report on Jobs also found that permanent worker availability continued to increase markedly. The number of candidates available for permanent job positions across the UK increased for the twelfth month running in February. While edging down to a five-month low, the rate of expansion remained historically sharp overall.

There were frequent reports that redundancies had pushed up the supply of permanent workers, while there were also indications of candidates seeking out the security of a permanent position over temporary roles.  All four monitored English areas registered higher permanent labour availability, with the sharpest upturn seen in the North of England.

At the same time, the report noted a slightly quicker upturn in temp candidate numbers. The pace of improvement quickened slightly from January and remained marked overall. Where higher temp labour supply was recorded, this was often attributed to relatively subdued economic conditions and a slowdown in hiring activity.

London registered the steepest rise in temp candidate availability, while the softest was seen in the North of England.

In terms of pay, permanent starters' pay increased further in February. The rate of salary inflation edged down to the lowest recorded since the current period of rising pay began in March 2021. The upturn was also softer than the long-run survey average. According to recruiters, employers adjusted their pay to attract suitable candidates amid the strong inflation environment. However, there were also reports of salaries stabilising due to tighter client budgets and a relative improvement in candidate numbers.

Average rates of hourly pay for temp workers across the UK continued to increase in February, thereby extending the current run of pay growth to three years. Although solid, the rate of wage inflation was among the softest seen over this period and below the historical trend. According to recruiters, temp pay had moved in line with market rates and due to the limited supply of suitable candidates. Temp wages increased across all four monitored English regions, led by the North of England.

Neil Carberry, REC Chief Executive, said, “This month’s survey shows the market slowing, and a concerning increase in the decline in temporary billings, to the lowest performance since the middle of 2020. Given recent news about GDP dropping, this overall picture is no surprise, but it is certainly still quite resilient by comparison with previous recessions. We know the economy has the potential to create jobs and opportunities, but it can only do that sustainably if we can get economic growth going.”

Carberry continued, “Following the Budget last week, which didn’t address some of the key drivers of growth like skills, infrastructure and reducing the cost of investment and employment, all eyes are on the Bank now. Lower interest rates will help build firm’s confidence to invest.”

“The temporary labour market is the unsung hero of the economic uncertainty of recent years,” Carberry said. “It keeps the cogs of the economy turning amidst uncertainty and labour shortages, but it still needs nurturing. As we approach the General Election, businesses will be looking to politicians for commitment on this, and reforms of regulation that will support it from IR35, to regulating of the umbrella market and delivering flexibility to the Apprenticeship Levy.”

 Jon Holt, chief executive and senior partner of KPMG in the UK, said, “The impasse between economic uncertainty and hiring decisions continued into February. Chief Executives tell me they are ready to invest and grow, including taking on new staff, yet the reality is they’re being held back by the prospect of weak demand.”