The latest KPMG and REC, UK Report on Jobs: London signalled signs of recovery in hiring activity, as the downturn in permanent placements eased and was only marginal. Meanwhile, growth in temp billings was the fastest in over two-and-a-half years. Moreover, London was the only area of the four monitored English regions where demand for permanent staff rose. Recruiters also reported a solid increase in temp vacancies, and one that was the most pronounced since December 2023.

Subsequently, pay pressures intensified from May. Permanent starting salaries and temp hourly rates for London based roles rose solidly. Meanwhile, the supply of candidates continued to expand markedly, with recruiters often citing redundancies as the main driver. That said, the respective rates of growth eased in June.

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, Vice Chair & London Senior Partner at KPMG UK, said: “June’s figures suggest London’s jobs market is moving in the right direction with temporary hiring reaching its strongest level in more than two-and-a-half years in our capital city, and permanent and temp vacancies increasing. While some employers are still taking a cautious approach to permanent hiring, it’s positive to see temporary placements giving employers the chance to get new projects going and test the market. These are encouraging signs that confidence is returning.

“The priority now is turning these signs of recovery into sustained growth. As businesses look to invest and expand, having access to the right skills will be critical – particularly in sectors like construction, engineering, social care and digital where recruiters are reporting significant shortages. Strengthening talent pipelines through apprenticeships, graduate programmes, digital skills and greater workforce mobility will help ensure London has the talent it needs to remain competitive and drive long-term economic growth.”

Marginal fall in permanent placements

A second successive monthly reduction in permanent placements across the capital was recorded in June. Where recruiters posted a decline, this was linked to a lack of suitable candidates, reduced demand and tighter budgets.

That said, the pace of reduction eased since May to signal only a fractional drop, and one which was the weakest of the four tracked English regions. Once again, the Midlands recorded the steepest drop, but here too the downturn was less pronounced than in May.

After having risen for the first time in six months during May, temp billings across London increased again in June. Moreover, the pace of growth was solid and the fastest in 32 months. Anecdotal evidence highlighted that temp billings increased as a result of new projects starting and better sales environments.

All four monitored English regions saw temp billings rise in June, led by the South.

As was the case in May, London was the sole tracked English region of the four monitored to register a rise in permanent vacancies in June. However, the pace of growth was modest and the weakest in the current three-month sequence of growth.

Demand for short-term workers rose across London for a second month running in June. The upturn was solid and the most pronounced in two-and-a-half years. Of the four tracked English areas, the North of England was the only other region to register an increase in temp vacancies, albeit one which was weaker than in London.

Increase in permanent staff availability slowest in 17 months

Permanent staff availability rose across London during June, thereby stretching the current run of increase which began in December 2022. According to anecdotal evidence, redundancies underpinned the latest increase.

The rate of growth was sharp, but the weakest in 17 months and slower than the UK average.

Reports of layoffs was again a key driver of a marked increase in temporary candidates across the capital in June. The rate of growth was the fastest of the four tracked English regions, but having eased notably from May it was also the slowest in four months.

Starting salary inflation ticks up

Recruiters in London recorded a solid rise in salaries awarded to new permanent joiners in June. Though historically subdued, the rate of increase quickened to a five-month high. According to recruiters, efforts to secure suitable workers had fed through to higher starting salaries.

For a third month running, London registered the strongest increase in starting salaries of the four monitored English regions. Meanwhile, the South of England was the only area to record a decline in June.

The third consecutive monthly rise in average rates of pay for short-term staff in London was sharp in June. Moreover, the pace of inflation was the strongest since January and surpassed the long-run average. Panellists noted that a lack of skilled workers and onboarding new contractors underpinned the latest increase.

Moreover, of the four tracked English regions, London recorded the strongest increase in temp rates. In fact, for the first time in four months, all regions registered a rise.

Neil Carberry, REC Chief Executive, said: “After a long recruitment winter, these figures offer genuine grounds for optimism. Temporary and contract work continues to lead the recovery, with London temp billings growth reaching its highest for over two-and-a-half years. Employers are responding to stronger demand, while remaining cautious about committing to larger-scale permanent hiring. Encouragingly, the decline in permanent placements eased in June. Businesses are sending a clear message to Government. The potential for growth is there, but confidence will only return if ministers give employers the certainty they need to invest and create jobs. Government must work in partnership with business, not increase costs and complexity. Policies such as unworkable guaranteed hours proposals and higher employment taxes risk holding back hiring, particularly for younger workers. If ministers want growth, they must create the conditions for businesses to invest, recruit and expand.”