The latest KPMG and REC UK Report on Jobs signalled a more pronounced decline in permanent staff appointments in May after a renewed contraction at the start of the second quarter. Temp billings also fell, though the downturn was slight and the least marked in the current 17-month sequence of decline. Additionally, vacancies for both permanent and temporary roles continued to decrease in May. However, the rates of contraction eased compared to the previous month.

Permanent starting salaries and temp hourly pay rates continued to increase in May. Recruiters often noted that businesses raised their offers to attract the right skill sets. Notably, while the rate of starting salary inflation across London accelerated and was the strongest among the four monitored English regions, the opposite was observed for temporary pay rates.

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.

Steeper reduction in permanent staff placements

Permanent placements across London fell for a second successive month in May. The rate of reduction was the fastest since January and rapid overall. Surveyed recruiters linked the decline to economic uncertainty, limited vacancies and softening demand across many sectors.

Permanent staff appointments also declined at a steeper pace at the national level, although the rate was slower than that seen in London. Moreover, all the four tracked English regions recorded a sharper reduction in new permanent joiners, except for the Midlands which saw a renewed rise.

Recruitment consultancies based in London signalled a marginal drop in temp billings in May. Anecdotal evidence often attributed the fall to shorter contract durations, increases in the National Minimum Wage and National Insurance contributions, plus fewer active projects. That said, after having eased for a fourth straight month, the rate of reduction was the slowest in the current 17-month run of decrease, and remained weaker than the UK-wide average.

The Midlands was the only monitored English region among the four that defied the broader trend by registering a fresh increase in temporary billings.

Latest data signalled further worsening in demand for both permanent and temporary staff across the capital.

That said, the rates of decrease eased on the month, with permanent and short-term vacancies falling at the slowest paces in nine and seven months respectively.

All four monitored English regions saw demand for permanent staff fall at a softer pace than in April, while the Midlands even recorded a renewed increase in temporary vacancies.

Permanent candidate numbers rise sharply

As has been the case throughout the past two-and-a-half years, the supply of permanent candidates in London rose in May. Despite easing to the least pronounced since February, the rate of expansion was marked. Panellists often cited job losses and redundancies, an influx of overseas candidates, a lack of vacancies, and the growing impact of AI.

However, among the four monitored English regions, London experienced the slowest growth in permanent candidates, while recruiters in the North reported the most marked increase.

Adjusted for seasonality, the Temporary Staff Availability Index indicated a further marked rise in the supply of temporary workers in London. The rate of growth was the strongest in three months, outpacing the other tracked English regions. Recruiters often indicated that a slow permanent jobs market and broader economic concerns prompted individuals to seek temporary roles or a second job. Fewer ongoing projects was also mentioned as a factor behind the latest increase.

Meanwhile, the North of England ranked last among the four monitored English regions, thereby indicating the least pronounced expansion in temp staff supply.

Sharper rise in starting salary growth

Continuing the trend shown since March 2021, average starting salaries awarded to successful candidates placed in permanent positions rose across the capital in May. The rate of inflation quickened since April and surpassed the long-run survey average. Skills shortages were said by panellists to have exerted pressure on pay.

Moreover, the rate of permanent salary inflation across London was the sharpest of the four tracked English regions by a healthy margin. Meanwhile, salary inflation was the slowest across the South of England.

Pay rates for temporary/contract workers in London rose midway through the second quarter, thereby extending the current run of increase to eight months. Surveyed recruiters indicated that the increase was aligned with the rise in the National Minimum Wage and aimed at attracting the right candidates. That said, the rate of inflation softened to a three-month low and was modest overall.

In fact, among the four tracked English regions, London recorded the weakest rise in short-term pay rates. The South of England was the only other region to report a slowdown in temporary wage inflation. In contrast, the North of England and the Midlands saw inflation pick up and ranked first and second, respectively.