Steep reduction in recruitment in June

The latest survey of recruitment consultancies signalled an accelerated decline in hiring activity across the UK at the end of the second quarter.

The Recruitment and Employment Confederation/KPMG report for June showed that permanent staff appointments fell at a pace that was the quickest in nearly two years, while temp billings decreased at the fastest rate since February. Survey participants’ responses indicated that reduced business confidence and concerns over costs had led companies to delay or cut back on staff hiring.

There were widespread reports that companies had pulled back on hiring due to reduced confidence around the outlook and worries over costs.

Correspondingly, candidate supply in June expanded at the fastest pace since late 2020. While the supply of permanent labour expanded at a slightly faster rate than that seen for temporary candidates, the rate of growth was the sharpest recorded since November 2020.

Pay growth, predictably, stagnated amid lower demand for workers, tighter client budgets and improvements in candidate supply. Starting salaries and temp wages both increased modestly overall, with rates of inflation notably weaker than their historical trends.

The upturn in temporary candidate numbers also gathered pace in June, with growth hitting the highest since November 2020.

Latest official figures from the Office for National Statistics (ONS) showed a further drop in vacancies across the UK in the three months to May. On an annual basis, the number of open roles fell by 150,000 to stand at 736,000. This was the lowest figure published in just over four years.

Vacancies have now declined continuously for close to three years, with the number of job opportunities now about
10% lower than seen before the Covid pandemic (819,000 in the three months to February 2020).

Retail saw by far the steepest reduction in demand for permanent staff across the eight job categories that posted a decline. The only sectors to record an increase in permanent vacancies were construction and engineering, though upturns were only mild overall.

ONS data also showed that average weekly earnings (including bonuses) increased by 5.3% on an annual basis in the
three months to April. Though strong in the context of historical data, this marked the softest rise in pay since the three months to September 2024.

Jon Holt, group chief executive of KPMG, said that geopolitical turbulence and the threat of rising costs along with technological change meant companies were “continuing to wait and see with their hiring”. He added that government infrastructure projects had produced more demand for workers in construction and engineering, which was welcome.

For the REC, Neil Carberry, chief executive, said there were underlying signs of demand for workers with temporary vacancies being particularly resilient.

He added: “The new roadmap for the Employment Rights Bill allows for full and frank consultation on how the new rules will be shaped and gives breatfing space to embattled businesses.”

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