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Economic uncertainty leading towards reliance on temp workforce

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Starting salaries for perm workers continued to rise sharply in April

The latest report on UK employment trends by KPMG and REC, and compiled by S&P Global, has revealed that recruitment patterns in April were affected by ongoing economic uncertainty and cautious hiring policies. The survey was carried out through questionnaires sent to around 400 recruitment and employment consultancies across the UK.

The report highlights that while there was an increase in temp billings growth, permanent staff appointments contracted at the fastest rate in over two years. This is mainly due to a preference for short-term staff, which pushed up temp billings growth to a seven-month high.

There was some good news, however, as staff availability improved for the second month in a row in April, with rates of starting pay for both permanent and temporary workers also strengthening. The report found that efforts to attract and secure suitably-skilled staff, along with the rising cost of living, were the key drivers of pay growth.

While the overall rate of vacancy growth slipped to a three-month low in April, the demand for staff continued to rise. There was a softer increase in permanent vacancies, while the number of temp roles increased at a sharper pace.

Interestingly, there was a further shift in hiring preferences from permanent to temporary workers amid the lingering economic uncertainty around the outlook and rising costs. Permanent placements fell for the seventh month in a row, while temp billings expanded solidly at the fastest rate for seven months.

Starting salaries for permanent workers continued to rise sharply in April, with the rate of inflation picking up to a four-month high. At the same time, temp wage growth improved to the highest level since January. Higher rates of starting pay were attributed to efforts to attract and secure suitably-skilled staff, and to reflect the higher cost of living.

Claire Warnes, Partner, Skills and Productivity at KPMG UK, commented: “The preference for hiring short-term staff continued unabated into April. Businesses remain cautious about committing to permanent hires in the face of ongoing economic uncertainty, which led to the quickest increase in temporary billings for seven months.

“But skills shortages still dominate the market with no signs of progress. Government and businesses must do more to avert this skills crisis.”

Neil Carberry, REC Chief Executive, said: “This data shows how uncertain many employers are feeling right now. The good news is they still need to hire, as growing vacancies show. But firms are hedging their bets. After a better month in March, in April we saw permanent hiring fall back quickly and businesses turn to temps to help them through. London had a particularly difficult month.

“For employers, hiring is unlikely to get easier soon. Those businesses that succeed will have good, long-term strategies for accessing talent from a wide range of sources, including retraining. Recruiters are well-placed to help with this. Nowhere is the need for a strong hiring strategy more obvious than in our largest employer, the NHS, where the failure to partner properly with NHS staffing suppliers is lengthening waiting times and costing the public purse more than necessary. Reforming NHS frameworks in partnership with the industry would be in the interests of patients, medical staff and the taxpayer.”

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