Lingering economic uncertainty and hesitancy to commit to new hires continued to weigh on recruitment activity across the UK during November. Permanent staff appointments contracted at the second-quickest rate since June 2020, while temp billings fell back into decline after two months of expansion.

The latest Report on Jobs by the Recruitment and Employment Confederation, KPMG and compiled by S&P Global showed that UK recruitment consultancies reported a further drop in permanent placements during November. This stretched the current period of decline to 14 months.

The report is based on responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

Notably, the rate of contraction in permanent placements accelerated to the second-sharpest since June 2020, when hiring was hit during the initial phase of the pandemic. Panel members noted that employer confidence had receded amid the current economic climate. This in turn led to hiring freezes and reductions in vacancies.

London recorded by far the steepest reduction in permanent placements of all four monitored English regions. The Midlands was the only area to see an increase, albeit one that was mild overall.

Meanwhile, billings received from temporary staff hiring fell in November, following increases in the prior two months. Although modest, it was only the second time that billings had declined since July 2020, with the drop exceeding that seen this August. According to anecdotal evidence, cost-cutting initiatives and lower activity at clients contributed to the fresh fall in billings. Temp billings fell in the South of England and London but rose slightly in the Midlands and the North of England.

In terms of vacancies, after stabilising in October, total demand for staff fell back into decline during November.

Demand for permanent workers weakened for the third month running in November. The rate of decline was the most pronounced since January 2021, albeit marginal overall. At the same time, temporary vacancies expanded at only a modest pace that matched October's five-month low.

The report found that permanent vacancies fell in both the private and public sectors, with the latter showing a quicker rate of decline. The overall upturn in demand for temporary staff was supported by the private sector, as short-term vacancies continued to fall in the public sector. That said, the rate of temp vacancy growth in the private sector moderated to a six-month low.

The REC’s report also showed the sharpest increase in overall staff availability for nearly three years.

Recruitment consultancies signalled a sustained upturn in the number of candidates available for permanent roles during November.

Permanent staff supply has now expanded in each of the past nine months, with the latest increase the sharpest since December 2020. The improvement in availability was widely linked to redundancies and workers concerned over current job security. There were also some reports of workers seeking out higher paid roles amid rising living costs. The supply of permanent labour increased rapidly across all four monitored English regions, led by the South of England.

At the same time, the availability of temporary staff increased at a sharp and accelerated pace midway through the final quarter of 2023. Furthermore, the rate of expansion was the most pronounced in 35 months. Recruiters attributed the latest upturn in temporary staff supply to fewer projects at clients and company layoffs.

By region, London saw the sharpest increase in temp labour supply in November, while the softest was seen in the North of England.

When it comes to pay, UK recruiters signalled that the rate of starting salary inflation across the UK moderated again during November. While strong overall, the latest increase in permanent pay was the softest seen in 32 months and slipped below the series long-run average. Competition for candidates with sought after skills was cited as the main driver of salary growth. Starting salary inflation eased in all four monitored English regions bar the Midlands.

In terms of temp pay, when adjusted for seasonal influences, the temporary wages index pointed to a further rise in pay for short-term staff in November. That said, the rate of inflation slipped to a modest pace that was the slowest seen since the current period of pay growth began in March 2021. While a number of recruiters mentioned that wages rose in line with inflation, others indicated that wage rates had levelled off.

By region, London recorded the quickest increase in temp pay, while the North of England was the only area to register a decline in wages.

Neil Carberry, REC Chief Executive, said, “2023 has been a testing year in our labour market, with permanent hiring dropping and temporary hiring flat or growing only a little. That’s the story again in this month’s data, though the market is quieter overall as firms start to move activity into 2024 rather than pressing ahead now. The averages hide a great deal of variability in regions and sectors though. The Midlands and the North both saw strong performances for temporary and permanent roles, in sharp contrast with London and the South, with permanent hiring in London especially slow. The ongoing stronger performance of the private sector on new vacancies is also a notable positive signal.”

“Anecdotes from REC members supports our client survey finding that employers are considering coming back to the market, but that in many cases the activity will be next year. So, while these figures represent a further slowdown in current hiring conditions, recruiters are more positive about the new year,” Carberry said.

Claire Warnes, partner, skills and productivity at KPMG UK, said, “The UK labour market remains tight as we move towards the end of a difficult year for the UK economy. The balance of supply vs demand is out of sync: we’re seeing even more people looking for work, with candidate supply rising at the fastest pace since the initial pandemic wave three years ago, but the number of available roles falling again in November. Employers are reining in hiring and continuing with redundancies in response to the sustained economic slowdown.”

“Businesses want to plan for the year ahead, but the prospect of faltering UK economic growth means the certainty they need isn’t there,” Warnes said. “This is now impacting starting salaries, as pay inflation isn’t as sharp as in previous months. “Even temp staff billings - which have given much needed flexibility to employers in key sectors such as health & care and IT - are facing some contraction. And with the Bank of England looking like it will be keeping interest rates high for now, businesses will need to stay resilient to manage this period of flux.”