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UK – Temporary placements drop at fastest rate in three years

09 July 2012

The job market in June saw a strong decline as hiring confidence dropped considerably with both temporary and permanent appointments seeing the sharpest fall in almost three years, a new survey by the Recruitment and Employment Confederation (REC) and KPMG showed on Monday.

And analysts are expecting unemployment to rise as in June permanent placements fell for the first time in six months while temporary and contract staff billings were down for the seventh month running. Cost cutting measures, additional bank holidays and the impact from the Agency Worker Regulations (AWR) were to blame for the drop in temporary posts as the only region to record solid growth in temporary jobs was the Midlands while the South bucked with the trend for permanent jobs.

“A decrease in hiring activity means we could see a period of increased unemployment, especially as a new wave of school leavers and graduates will be entering the labour market over the summer,” warned Kevin Green, CEO at the REC.

Although he added that the UK labour market had been “remarkably resilient throughout the downturn and our slow economic recovery”, Mr Green cautioned that employer confidence is fragile.

The pace of the decline in job vacancies is a “real worry” to Bernard Brown, Partner and Head of Business Services at KPMG. He suggested that the poor job situation in June is more than a mere blip. “If this trend were to continue, there’s a very real chance we could hit a 3 million unemployed figure in the UK in the not too distant future,” he said.

Despite the sharp fall in job vacancies, demand for both permanent and temporary workers increased in June. Particularly in sectors such as IT & Computing and Engineering/Construction permanent staff were most in demand while in the blue collar and the hotel and catering services demand was the lowest. 

“There is still demand for workers and vacancies continue to rise. Recruiters tell us that employers are still hiring, but their increased sense of caution is manifesting in them taking longer to make decisions and to confirm hires – and that slow down in the recruitment process is clearly having a negative impact on the number of placements,” said Mr Green.

Temporary staff was especially sought after in medical, care and nursing jobs, followed by engineering and construction. But demand dropped for hotel & catering staff, as well as for accounting/financial.

Staff availability for permanent and temporary workers was also up in June but pay pressures in June meant salaries remained flat for temporary workers, with only a slight increase recorded for permanent employees.  

Mr Brown said that the latest recruitment data comes as a “sobering reminder that we’re far away from a confident economic situation. Of course, we must remember that these figures have come on the back of months of uncertainty in the Eurozone. This has dented confidence and created nervousness around investment, which in turn has impacted job creation,” he added.

But things were looking different for professional jobs, according to the latest data from the Association of Professional Staffing Companies (APSCo) in association with Staffing Industry Analysts. The research indicates that in May recruitment has returned to growth, following a downturn in spring. But the picture is still an unsettled one as the recovery in vacancies and placements has been inconsistent.

In the month, permanent placements were up by +17% month-on-month and vacancies rose +19%, although the latter did not reach levels from a year ago. Nonetheless, growth in both placements and vacancies was up by +34% and +35% respectively on December 2011, one of the year’s lows. Permanent recruitment in finance and accounting, and IT showed the strongest growth rates.

“The latest data are an improvement on the bad news from early spring, but it’s not clear that this is the beginning of a long-term positive trend. The growth from the low-point in December hasn’t been as consistent or widespread as we would have hoped,” said Ann Swain, Chief Executive for APSCo. 


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