Recruitment activity rises at quicker pace in November - KPMG/REC report

Recruitment activity across the South of England rose at a faster pace in November, according to the latest KPMG and REC, UK Report on Jobs: South of England survey, with both permanent placements and temp billings expanding more sharply than in October. This was supported by robust demand for staff as many firms sought to expand capacity, with vacancies data pointing to further steep increases in both permanent and temporary roles.

Although not as severe as in October, the availability of workers continued to decline rapidly in November. As a result, pay pressures continued to build, with intense competition for workers driving the steepest increase in starting salaries since the survey began in late 1997. 

The KPMG and REC, UK Report on Jobs: South of England is compiled by IHS Markit from responses to questionnaires sent to around 150 recruitment and employment consultancies in the South of England.

Sharper increase in permanent staff appointments

Adjusted for seasonal factors, the Permanent Placements Index signalled a sustained upturn in permanent staff appointments across the South of England during November. The rate of expansion picked up from October and was among the sharpest on record. According to recruiters, robust demand for staff and company expansions had driven the latest increase. That said, the rate of growth was the slowest of all four monitored English regions. London and the Midlands recorded the joint-fastest expansions of permanent placements in November.

Billings received from the employment of temp staff across the South of England rose for the sixteenth month in a row during November. The rate of growth quickened slightly from October's seven-month low and was sharp overall. Anecdotal evidence indicated that rising business activity at clients and challenges finding permanent staff had boosted billings during November.

Temp billings also rose markedly across the UK as a whole, with the rate of increase outpacing that seen in the South of England. London posted the sharpest increase in temporary billings, with the Midlands seeing the least marked expansion.

Recruitment consultancies in the South of England continued to signal a steep increase in demand for permanent staff in November. This was despite the rate of expansion softening to a seven-month low. Permanent vacancies rose at a similarly-sharp rate at the national level.

Temporary staff demand also expanded across the South of England. Though marked and well above the series average, the rate of growth was the softest since April and not quite as steep as the UK-wide trend.

Weakest drop in permanent candidate numbers for six months

As has been the case since March, the availability of permanent staff across the South of England declined during November. Though sharp and among the quickest on record, the rate of deterioration was the slowest seen for six months. The drop was linked to uncertainty stemming from COVID-19, fewer overseas workers and robust demand for staff.

Compared with the other three monitored English regions, only the North of England registered a steeper drop in permanent candidate supply.

The supply of temporary labour in the South of England fell again during November, albeit at a slightly softer rate than in October. Nonetheless, the rate of contraction was substantial overall and continued to outpace that seen at the UK level. London registered the most marked deterioration in temp candidate supply, with the softest decline in the Midlands.

According to recruiters, strong demand for workers, a relatively low unemployment rate, Brexit and a lack of suitably-skilled staff had weighed on temp candidate numbers.

Sharpest increase in starting salaries on record

Greater competition for scarce staff and efforts to entice applicants drove a further steep increase in salaries awarded to new permanent joiners in the South of England in November. Furthermore, the rate of pay inflation was the sharpest seen since data collection began just over 24 years ago.

Starting salaries also rose at an unprecedented pace at the national level, with inflation broadly in line with that seen in the South of England. The Midlands also registered a series record upturn in permanent starting salaries in November.

The seasonally adjusted Temporary Wages Index posted above the neutral 50.0 value to signal a sustained increase in temp pay midway through the fourth quarter. The rate of wage inflation eased slightly for the second month running, but remained sharp overall and among the quickest in the survey history.

Anecdotal evidence suggested that temp pay had increased due to candidate shortages, greater demand for staff and efforts to attract applicants.

Across the four monitored English regions, the Midlands recorded the steepest increase in temporary pay, with recruiters noting a survey-record increase in the region.

Commenting on the latest survey results, Will Smith, Partner for KPMG in the South East, said:

“While candidate availability clearly remains an issue, as showcased by the steepest rise in starting salaries seen here since this survey began almost a quarter of a century ago, hopefully this is also a sign the supply of labour is finally starting to catch up with demand longer term.”

Neil Carberry, Chief Executive of the REC, said:

“It’s too early to tell what the effect of the Omicron variant might be on the labour market – December may be slower than previous months as its effects feed through. Hospitality will be in the forefront of any changes as we approach the festive season, of course, and the impact of high inflation will also be felt as purses tighten in January. But the broader outlook is more positive for candidates, suggesting that the labour market will remain tight for some time to come. This will put a premium on skills development, and the flexibility to hire overseas when necessary. These two issues will be critical ones for the government to address next year – both levelling up and delivering a global Britain rely on them.”