London’s labour market cooled faster than anywhere else in the UK last month, according to a survey showing the steepest decline in the recruitment of permanent staff since the height of the Covid-19 pandemic.
The jobs report by advisory firm KPMG and the Recruitment & Employment Confederation, a trade body, pointed to the seventh consecutive monthly decline in people placed in permanent roles in April.
Permanent recruitment activity fell at the fastest pace since January 2021, when the UK was in a Covid lockdown, and for a third consecutive month it was weaker in the capital than in any other region.
Claire Warnes, partner at KPMG UK, said economic uncertainty had made businesses “cautious about committing to permanent hires”, with many announcing recruitment freezes or delaying decisions, while others still struggled to find candidates with the right skills.
At the same time, the report noted a pick-up in recruitment of temporary workers, which rose at the fastest pace for three months. The strongest demand was seen for nursing, medical and care roles.
REC chief executive Neil Carberry said the increase in demand for temps showed there was “still plenty of opportunity out there”, even though sectors such as logistics, driving and food had been “heavily affected by changing consumer behaviour” amid the cost of living crisis.
The survey showed demand for permanent staff had weakened across all areas of the economy. However, the public sector was more resilient than the private sector, where recruiters registered the sharpest slowdown in the IT and retail industries, and in hotels and catering.
Recruiters also said they were finally finding it easier to attract candidates after two years of severe staff shortages, with more people looking for work because they had been made redundant while others were searching for a better-paid role. Again, this increase in candidate availability was more noticeable in London than in any other region.
Weaker recruitment and higher numbers of jobseekers have yet to take the heat out of wage growth, which the Bank of England increasingly sees as a threat to its efforts to return inflation, now at 10.1 per cent, to the 2 per cent target.
The REC’s measure of pay pressures suggested that the rate of increase in starting salaries, while below recent averages, had picked up in April, both because employers were competing for skilled staff and because they were having to pay more to reflect the rising cost of living.
“Wages are rising strongly for both temps and new permanent hires in the face of inflation, even though candidate availability is finally starting to improve,” said Carberry.
