Permanent placements in the UK fell at their fastest rate since August 2023, marking a sharp downturn in December 2024, according to the latest Report on Jobs survey by the Recruitment and Employment Confederation, KPMG and compiled by S&P Global.

Recruitment activity at firms was reportedly on hold amid concerns over the cost of hiring which was linked to the government’s proposed changes to national insurance contributions and employment rights.

Permanent placements were down across England. Acute declines were seen in the North and South of England. A noticeably slower fall in placements was registered in London.

At the same time, temp billings continued to fall in December. It was the sixth successive monthly contraction with the latest decline steeper than the average for 2024. Recruitment market activity was reported to be slower, with firms reluctant to take on or replace staff given economic uncertainty and the recent government budget.

The Midlands bucked the wider market trend, registering modest growth in temp billings. All other English regions, led by the South of England, saw a contraction.

The latest vacancy data showed another drop in demand for staff in December. A decline in the respective index to 42.8, from 43.9 in November, signalled the steepest contraction since August 2020.

December marked the fourteenth successive month in which a decline in vacancy numbers has been recorded.

Meanwhile, permanent staff vacancies fell to a steeper degree than for temp staff during December, in line with the recent trend. Overall, the decline in perm vacancies was the steepest in nearly four-and-a-half years. However, temp vacancies fell for a fifth successive month and to the greatest degree since June 2020.

Demand for private sector workers continued to fall in December - for both permanent and temporary staff. Rates of decline accelerated in each instance to the greatest in over four years. In the public sector, vacancies fell at similarly sharp rates for both permanent and temporary staff.

The latest data also showed that permanent staff vacancies were down across all sub-sectors for the second month running in December. The steepest rate of contraction was seen for executives/professionals followed by IT/computing.

Of the sub-sectors covered, only blue-collar and hotel/catering recorded an increase in temp vacancies during December. Executive/professional saw the steepest rate of contraction.

Neil Carberry, REC Chief Executive, said in a press release, “This report emphasises a weak mood in some businesses as they built their budgets for this year, and made changes designed to save on costs after a tough budget. That said, sentiment can change quickly.”

“December is always a hiring low point, and a new year brings new hope – with inflation under control, low unemployment and economic growth expected, the fundamentals are better than many appreciate,” Carberry continued. “It is what happens now, as firms return to the market in January, that will decide the path ahead. Recruitment is one to watch in early 2025 because it is one of the earliest indicators of a broader economic recovery, with any sign of a turn hugely significant with the sector contributing a massive £44.4bn to the UK economy in 2023.”

The report also asked recruitment consultants to report whether the availability of permanent and temporary staff has changed in the previous month.

The seasonally adjusted total staff availability index continued its recent upward trend during December. Reaching 60.6, up from 59.8 in November, the rate of growth was the sharpest since June. Permanent staff availability increased to a steeper degree than temporary worker supply.

The availability of workers to fill permanent positions increased again in December, extending the current period of growth to 22 months. There were reports that a combination of low demand and a growing number of redundancies (reflective of cost-cutting at firms) underpinned the rise in staff availability.

The survey saw an increase in the availability of temporary workers, as has been the case since March 2023. The rate of growth was little changed, remaining elevated and well above the survey’s historical trend. A lack of vacancies and a general market slowdown were reported to have led to a further rise in temp staff availability.

According to the latest English regional data, similar-sized increases in temp availability were recorded across England in the latest survey period.

In terms of pay, permanent salaries increased again during December, in line with the trend recorded by the survey since March 2021. Although remaining well below the survey’s historical trend, the rate of inflation picked up to a four-month high.

Panellists reported that competition for high-quality candidates had raised starting salaries. However, an increase in the supply of candidates somewhat limited salary growth, according to panellists. By English region, London recorded the steepest increases in starting salaries. In contrast, there was a decline in the South of England.

Temp pay saw its third successive monthly increase. Inflation was modest, though still the highest seen since June. Higher pay rates were reportedly being used to attract candidates, although the increased availability of workers served to restrict the pace of inflation. Modest pay increases were seen in the Midlands and the North of England. A solid rise in temp pay was recorded in London, in contrast to a decline seen in the South of England.

Jon Holt, Group Chief Executive and UK Senior Partner KPMG said, “As we start the new year, it’s a muted one for the UK jobs market. December’s data shows weakening demand causing the biggest contraction in vacancies since August 2020, coupled with hiring intention declining at a pace not seen for 16 months.”

“The hiring market could continue to show signs of caution in the short-term, as businesses pause to take stock of higher employment costs, a more gradual pace of interest rate cuts and rising inflation,” Holt added. “However as 2025 progresses and UK economic growth picks up, businesses will need new talent. Salary inflation being at its steepest in four months shows they are still willing to compete for it. “Chief Execs will certainly also be counting on new policies which support their 2025 growth ambitions and boost confidence to invest.”