The latest KPMG and REC, UK Report on Jobs highlighted a continued downturn in hiring across the capital in December. Sharp contractions were observed for both permanent placements and temporary billings, although the downturn in permanent new joiners moderated since November. Demand for workers continued to weaken, while redundancies and a lack of new work continued to drive increases in the supply of both permanent and temporary workers.

Despite a surplus of job seekers, recruiters in the capital reported an increase in pay. Both permanent starting salary and temporary wage inflation intensified during the month, with underlying data showing that businesses were willing to offer more for candidates with the right skill sets.

The KPMG and REC, UK Report on Jobs: London is compiled by S&P Global from responses to questionnaires sent to around 100 recruitment and employment consultancies in London.

Commenting on the latest survey results, Anna Purchas, London Office Senior Partner at KPMG UK, said: “We’re seeing London’s businesses make a frugal start to the new year when it comes to recruiting: London firms’ hiring decisions in December meant new permanent placements fell for the fifth consecutive month, likely reflecting the increased tax considerations for employers and the capital’s upward pressure on pay.

“But green shoots are starting to show. The rate of the decline in London job openings has eased and is moderate compared to the rest of the UK. While there are plenty of candidates available, they might not have the skills employers are looking for. This means a focus on training to plug the city’s skills gaps – particularly in sectors such as healthcare and engineering – will be vital.”

Rapid decline in permanent placements

Recruiters based in the capital noted a fifth consecutive monthly decline in permanent placements during December. The rate of decrease, while easing on the month remained sharp overall. Economic uncertainty was said to have driven a cautious hiring environment, with the Autumn Budget further contributing to the downturn.

All four monitored English regions recorded a fall in new permanent staff hires. However, London recorded the mildest decline and was the only region where the rate of contraction eased. Meanwhile, recruiters in the South of England continued to report the steepest decline.

A sharp and accelerated fall in temp billings was recorded across London in December, thereby stretching the current run of decrease to a year. The rate of contraction exceeded the UK-wide average. Based on anecdotal evidence, the completion of projects without new business to replace them led companies to decrease their temporary billings.

Among the four monitored English regions, the South of England experienced the most substantial drop in temporary billings, while the Midlands was the only region to report growth.

As has been the case in each month since last August, December marked a further fall in permanent vacancies across the capital. The respective seasonally adjusted index edged down for a fifth straight month to the lowest since February, and signalled a rapid decline.

In fact, all four monitored English regions experienced accelerated declines in permanent vacancies during December.
Demand for temporary workers also worsened in December, with contractions recorded for a fourth straight month. The pace of decrease was rapid and the most marked since July 2020.

For the second month in a row, all four monitored English regions reported a decrease in temporary vacancies, with contraction rates quickening across the board.

Supply of permanent candidates expands rapidly

The availability of permanent workers across the capital rose for a twenty-fifth consecutive month in December. The rate of expansion accelerated, broadly aligning with the average observed throughout the current period of growth and across the UK overall. The latest increase was primarily driven by redundancies and a decrease in available work opportunities.

All four monitored English regions experienced stronger rates of expansion in permanent staff availability, with the Midlands leading the upturn.

The year ended with a considerable increase in the supply of temporary workers available in London. The rate of growth was largely consistent with that of November and aligned with the UK-wide average. This rise was attributed to the completion of projects, a shortage of new business and redundancies.

Comparable rates of expansion in temporary staff supply were also observed in the remaining three monitored English regions.

Starting salary inflation intensifies notably

After easing to a 44-month low in October, the rate of permanent starting salary inflation intensified for the second successive month and was sharp in December. The pace of inflation was the most marked since July. According to surveyed recruiters, businesses were keen to pay more for the right skill sets.

Of the four monitored English regions, London recruiters recorded the strongest rise in salaries for permanent new hires. In contrast, the South of England was the only area to experience a decline.

Temporary pay rates increased for the third consecutive month during December. The respective seasonally adjusted index ticked up to a six-month high, but was still below the long-run average. Recruiters surveyed noted that businesses were prepared to offer higher pay for the right talent.

Of the four monitored English regions, the South of England was the only area to experience a drop in hourly wages for temporary workers.

Neil Carberry, REC Chief Executive, said: “This report emphasises a weak mood in some businesses as they built their budgets for this year, and made changes designed to save on costs after a tough Budget. That said, sentiment can change quickly. London at least recorded the mildest decline in permanent placements in the country which we hope is a bellwether going into 2025. December is always a hiring low point, and a new year brings new hope – with inflation under control, low unemployment and economic growth expected, the fundamentals are better than many appreciate. It is what happens now, as firms return to the market in January, that will decide the path ahead. Recruitment is one to watch in early 2025 because it is one of the earliest indicators of a broader economic recovery, with any sign of a turn hugely significant with the sector contributing a massive £44.4bn to the UK economy in 2023.”