The latest KPMG and REC, UK Report on Jobs indicated that labour market conditions softened in August. Permanent placements fell at the quickest rate for over three years as many employers chose to postpone staff hiring amid heightened political and economy uncertainty. Temp billings growth meanwhile remained stuck close to a 75-month low. Total demand for staff rose at the weakest pace since the start of 2012, with both permanent and temporary vacancies rising at softer rates. An uncertain outlook also weighed on candidate numbers, as many people were reluctant to seek new roles in the current climate. However, the latest reduction in staff supply was the least marked for over two-and-a-half years. Starting pay for permanent and short-term workers consequently rose at softer rates.
Recruitment consultancies signalled that the number of people placed into permanent job roles dropped for the sixth month running in August, as many firms delayed hiring decisions due to Brexit-related uncertainty. At the same time, temp billings continued to rise only marginally. August’s data also signalled the slowest increase in total job vacancies since January 2012. Growth of demand eased for both permanent and temporary staff, with the former expanding at the slowest rate for seven years and the latter at the softest pace for a decade. Starting salaries for permanent workers continued to rise in August amid reports of greater competition for staff. Though sharp, the rate of inflation was the slowest recorded since December 2016. Meanwhile, temp pay growth edged down to a five-month low.
Although overall candidate availability deteriorated at the slowest pace for 32 months in August, the reduction remained much quicker than the historical trend. The fall was led by a further steep decline in permanent candidate numbers, as temp labour supply fell modestly.
Regionally, the Midlands, North and South of England all saw marked declines in permanent placements. Notably, it was the first reduction seen in the North of England for six months. London bucked the overall trend and saw a slight rise in permanent staff appointments in August. Temp billings growth was relatively muted in the North and South of England, while billings broadly stabilised in the Midlands. In contrast, London recorded a renewed fall, albeit only marginal. Softer increases in vacancies were seen in the private sector, while public sector staff demand remained lacklustre. Private sector permanent vacancies rose at the softest rate since January 2012, while growth of demand for temp staff eased to a 79-month low. In the public sector, permanent staff vacancies fell again, and temp staff demand rose only modestly.
Commenting on the latest survey results, Neil Carberry, REC Chief Executive, said:
“Today’s figures are a sobering reminder to politicians of all parties that national prosperity relies on businesses creating jobs and growing careers. Britain’s record on jobs is world-leading. It’s a key part of our economic success, with recruiters at the forefront of it. And there are still great opportunities out there for those looking for a new job and a boost in earnings.”
Wage growth tops expectations as unemployment falls again
Latest figures from the Official for National Statistics (ONS) show above forecast wage growth in the three months to April. Pay rose by 3.4% compared with a year ago. After taking inflation into account, wage growth was 1.4%.
The news accompanied another fall in unemployment which dropped by 34,000 to 1.3m in the three months to April. The unemployment rate remained at 3.8% and has not been lower since the October to December 1974 period, the ONS said. The number of people in work increased by 32,000 to 32.75m. The employment rate for women was 72%, the highest on record.
The rise in employment was the weakest since August and was significantly down on the average 167,000 recorded in the first quarter, although it continued to show that the UK jobs market was defying the worst fears over Brexit.
John Hawksworth, chief economist at PricewaterhouseCoopers, said: “The rate of increase in the latest three months was slower than in most previous quarters, which may be a sign that Brexit-related uncertainty is beginning to make companies more cautious about new hiring.”
John Philpott of the Jobs Economist consultancy said the rise in employment masked a drop of 38,000 in the number of workers employed by a company, with self-employed people accounting for the entire net rise. “A closer look at the figures offers a slightly different story,” he said.
Tej Parikh, chief economist at the Institute of Directors, said: “The buoyant labour market is still going strong for the UK economy, even as it weathers widespread political uncertainty.”
“However, the employment boom cannot last forever, and is certainly showing signs of softening.”
Demand for temporary workers in the UK softens
The number of temporary employees in the UK fell by 3.7% on a seasonally adjusted basis to 1.52m n the three-months from January through to March 2019 when compared to the same period a year ago, according to official figures.
The Office for National Statistics reported that the number of temporary employees as a percentage of total employment was 5.5%, down from 5.8% compared to the same period a year ago. Compared to the previous period ended in January 2019, the number of temporary employees also saw a decrease of 1.1%.
Of the 1.52m temporary employees during the period ended March 2019, approximately 387,200 were temporary because they could not find a permanent job; 451,000 did not want a permanent job; 131,000 had a contract with a period of training; and 558,800 cited other reasons.
The report also found that despite rising recruitment and retention pressures, median basic pay expectations in the 12 months to March 2020 remain at 2%. However, pay expectations have fallen back in the private sector from 2.5% to 2% and have risen in the public sector from 1% to 1.5%.
UK unemployment hits 45 year low
Official figures show that unemployment in the UK is at its lowest level for 45 years. The Office for National Statistics (ONS) said the number of people out of work in the past three months has now been falling for five years and is now at 3.8% – lower than at any time since the end of 1974. Employment also jumped by 99,000 in the three months to March, to 32.7m with the number of people working now the highest on record at 76.1%.
The number of people in work continues to reach near record levels as fewer women retire between the ages of 60 and 65, new figures reveal. Unemployment fell by 65,000 to 1.3m, continuing a general trend which started in early 2012.
Average earnings increased by 3.2% in the year to February, compared with 3.5% on the previous month while the number of economically inactive people in the UK fell by 23,000 in the latest quarter to 8.6m, a rate of just under 21%, one of the lowest on record. The number of vacancies fell by 16,000 to 846,000.
The UK’s employment rate of 76% is at a joint record high, while for women it has reached the highest on record at 71%. The increase is partly due to changes in the state pension age for women, resulting in fewer retiring between the ages of 60 and 65, the ONS said.
The number of people in work has increased by 354,000 over the past year, entirely due to full-time employment. Part-time working fell by 18,000 to 8.5m, while self-employment increased by 180,000 to just under 5m.
The UK labour market remained robust in November according to the latest figures from the Office for National Statistics (ONS) with the number of people in work reaching a new high of 32.54m.
Significantly, the data also showed a sharp increase in average earnings, (including bonuses) which rose 3.4% y/y, the biggest increase since July 2008 and higher than October’s 3.3%. Adjusting for inflation, which fell to 2.3% in November, average pay increased by 1.1% in real terms.
Unemployment was flat, with a small increase of 8,000 between September and November for a total of 1.37m with the number of job vacancies up 10,000 to 853,000. The unemployment total is 68,000 lower than a year ago, with the jobless rate 0.2% down on this time in 2018.
ONS head of labour market David Freeman said: “The number of people working grew again, with the share of the population in work now the highest on record.
“Meanwhile, the share of the workforce looking for work and unable to find it remains at its lowest for over 40 years, helped by a record number of job vacancies.
“Wage growth continues to outpace inflation, which fell back slightly in the latest month.”
Howard Archer, the chief economic adviser to the EY Item Club, said the increase in earnings growth indicated that the “tight labour market is pushing up pay – after suffering a relapse earlier in the year”.
But he warned that while employers were increasing pay to recruit staff during a period of skills shortages, workers already in a job were finding it more difficult to secure an inflation-busting rise.
UK businesses remain concerned about the UK’s future outside the EU and caution that it could lead to lower economic growth, according to a report by the ICAEW.
The survey found that 69% of senior business professionals, who are also chartered accountants, expect uncertainty surrounding the UK relationship with the EU which could affect them negatively. Of the 501 people surveyed, 67% fear lower UK economic growth will hurt their business, while 63% fear a slowdown in the global economy.
UK firms are being squeezed by labour shortages, rising prices and a slowdown in sales, according to a report from the British Chambers of Commerce (BCC).
More companies than ever before are finding it hard to recruit staff with four fifths of employers in manufacturing, and almost as many in the service sector, reporting difficulties in finding the right workers.
Dr Adam Marshall, Director General of the BCC, said these findings suggested the government should listen more closely to business when it came to drawing up its migration policies.
“Business concerns about the government’s recent blueprint for future immigration rules must be taken seriously – and companies must be able to access skills at all levels without heavy costs or bureaucracy,” he said.
The BCC also said that the lack of clarity over the process of leaving the European Union had led to stagnating growth and business confidence in the UK.
Suren Thiru, Head of Economics at the BCC, said the UK economy was facing “persistent Brexit uncertainty and rising cost pressures”.
He added that subdued household spending levels and tightening cash flow was making it hard for businesses, particularly in the services industries to grow.
However he said that upward pressure on prices from higher wage settlements remained relatively muted.
The BCC’s survey covers 6,000 firms, employing over one million people across the UK.
The latest KPMG/REC report paints a bright picture of the UK jobs market. The report for October showed that the number of people placed into permanent jobs in the UK rose at a sharp and accelerated rate, with the rate of growth the second fastest since March. At the same time, billings for temporary staff expanded at the fastest pace since May.
The survey reported continued strong demand for permanent staff within the UK labour market although it did note that the rate of growth was restricted by candidate shortages. On the temp side, an inability to find candidates for permanent positions was cited as a reason for robust demand.
Although job vacancies expanded at the softest pace for nearly two years in October, growth of demand for staff remained historically sharp at the start of the fourth quarter. Starting salaries continued to rise sharply in October, with the rate of inflation holding close to September’s 41-month record. Hourly pay rates for temporary staff also increased markedly, despite the rate of growth edging down to the least marked since March.
Commenting on the latest survey results, James Stewart, Vice Chair at KPMG, said:
“Whilst Brexit may be dampening overall business investment, firms continue to hire new staff at near record rates. With the jobs market so heated, businesses across the country, of all types, are struggling to find work ready staff. A four-decade low in unemployment and a dwindling supply of EU workers means good candidates are at a premium. Consequently, we’re seeing wages pushed upwards and a trend of canny workers job hopping to secure a pay rise rather than remaining loyal to their existing employers.”
APSCo reports strong increase in permanent placements
The Association of Professional Staffing Companies (APSCo) has reported a strong increase in the number of candidates securing permanent roles in July. APSCo’s research, which focuses on professional recruitment, showed a 10% increase in July although there were notable differences by sector.
While permanent placements within IT and financial services increased by 33% and 10% respectively over the 12-month period, the number of marketing professionals securing permanent roles during this time slipped by 11%. Meanwhile, vacancies for permanent staff, meanwhile, fell by 3% in July 2018. At the same time, demand for contractors also slowed down with vacancies decreasing by 7% across the board, signalling a slowdown in demand for talent.
APSCo added that the number of contractors out on assignment in July 2018 was 15% lower than the previous year. Despite this overall decrease, the contract market within financial services remains strong with demand for non-permanent professionals up 27% year-on-year across the sector. The number of finance contractors out on assignment increased by 3% in July 2018.
APSCo said that this strength is likely to be attributed to Brexit uncertainty, with some firms hesitant to increase permanent headcount until there is more clarity around service exports once Britain leaves the union.
Meanwhile, the most significant swing in hiring activity can be seen within the IT sector, where the number of contractors out on assignment plummeted by 33% year-on-year in July 2018. Permanent placements within the sector, meanwhile, increased by the same percentage over the same period.
John Nurthen, Staffing Industry Analysts’ Executive Director of Global Research commented, “While our survey detects year-on-year weakness in placements and vacancies for temporary jobs, the general labour market shows signs of health, with 32.4 million persons employed and total job vacancies up 6.6% to reach 829,000.”
Ann Swain, Chief Executive of APSCo, also commented, “While overall hiring activity remains strong, the current climate is certainly creating interesting activity in the market. Britain’s exports of financial services to the European Union hit a record high last year, and although firms need talent to meet demand, many are understandably reluctant to bring on board permanent talent.”
HMRC has cautioned that some people employed through agencies and umbrella companies who sign up to arrangements that claim to save them tax, could be in effect tax avoidance schemes.
HMRC warned that most employment agencies and umbrella companies operate within the tax rules. However, some umbrella companies and agencies promote arrangements that claim to be a ‘legitimate’ or a ‘tax efficient’ way of keeping more of your income by reducing your tax liability.
These arrangements leave you at risk because you are ultimately responsible for your tax affairs and for paying the correct amount of tax and National Insurance contributions.
These types of arrangements are likely to result in you paying additional tax, interest and perhaps penalties, and are never HMRC approved.
These arrangements may work in different ways, but the companies that use them claim they will help you keep more of your income and reduce your paperwork.
They will tell you that the payment is non-taxable because it doesn’t count as income as it’s a loan, credit, or something similar. These payments are actually no different to normal income, and tax and National Insurance contributions are payable.
The company may tell you that you have to sign up to these arrangements if you want to work for them. If they do, you should seek independent professional advice so that you fully understand the options available to you.
HMRC cautioned that arrangements like these that claim you pay less tax are extremely high risk and said it will always challenge tax avoidance schemes. If you are involved in an arrangement like this, you’re highly likely to be avoiding tax and you could end up paying additional tax, National Insurance contributions and interest. Penalties may also apply.
In summary, HMRC advised that any individuals should get independent professional advice if you’re not sure whether you are involved in this type of tax arrangement.