South of England starts the year with further fall in recruitment activity

Recruitment fell across the board across the South West according to the latest KPMG and REC, UK Report on Jobs: South of England survey, compiled by S&P Global.

The trend has been influenced by recent changes in employment policies outlined in the government's Autumn Budget, a sluggish economic climate and increasing uncertainty for the upcoming year.

Businesses are trimming their workforce numbers and recruiters say that permanent employees seeking to boost their incomes led to an increase in the supply of temporary workers.

The weak labour market situation in the South of England resulted in reduced pay across the board, with permanent salaries and temporary wage rates decreasing for the third and second consecutive months, respectively.

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

However, for the first time in 11 months, the South of England did not register the most severe reduction in new permanent joiners of the four monitored English regions. The worst performing region was the North of England. 

Of the four monitored English regions, the South of England recorded the strongest decline in temp billings. Meanwhile, the Midlands was once again the only region to report an increase, albeit negligible.

Permanent vacancies across the South of England fell for an eighteenth straight month in January. The rate of decrease quickened for a fifth month running to the fastest since June 2020. 

The downturn in permanent salaries continued for a third month running across the South of England in January. Moreover, the South of England remained the only monitored English region to record a fall, with underlying evidence pointing to slowing market, economic concerns and increased competition for roles. That said, the rate of decrease eased notably from December to signal only a minimal drop. 

The Midlands was the only monitored region to observe an acceleration in the rate of permanent salary inflation and also registered the most significant increase of the four English regions.

Recruiters based in the South of England recorded a second consecutive monthly fall in hourly pay rates in January. The rate of reduction was marginally quicker than seen in December and modest overall, but the strongest in six months. Anecdotal evidence noted that squeezed budgets prompted the latest downtick.  

Like in permanent salaries, the South of England was the only region to report a decline in temporary pay rates. The Midlands was likewise the only area to experience an acceleration in the pace of temporary wage inflation and also led on temp pay growth at the regional level.

David Williams, Bristol Office Senior Partner at KPMG UK, said: “January brought a fresh set of challenges for the job market in the South of England, with a notable drop in both permanent and temporary placements. Sluggish growth continues to cast a shadow over hiring decisions, and employers are treading carefully in light of the upcoming increase to National Insurance contributions. 

“Notably, the South of England was the only region to see a decline in starting salaries, which could prove a silver lining for businesses in the region. This dip in the cost of hiring should allow companies to bring in talent at more budget-friendly levels, and could help to ease the growing pool of candidates actively looking for work.”

Neil Carberry, REC Chief Executive, said: “Businesses entered the year uncertain on the growth path, and that has driven a "wait and see" approach to hiring. Around the country, REC members report that clients have plans and are hopeful for the year ahead - but firms are slowing investment until they see more momentum in the economy. This explains why temporary staff employment broadly stalled across the Midlands, although the Midlands and London had softer declines in permanent hiring than elsewhere in England, however. Last week's move on interest rates was timely as a way of boosting confidence. The more central role of growth in Government thinking since the Chancellor's speech last month will also help. But it takes time, and real action, to build business confidence. An autumn of fiscal gloom, difficulty navigating significant upcoming tax rises and little progress on the practicalities of a costly new approach to employment rights are all acting as brakes on progress. As well as the monetary stimulus to growth, it's time for greater clarity on how the Government will use its industrial strategy to drive the growth of the whole economy.”