Hiring continues to fall but pace slows

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UK recruitment activity continues to decline because of the Covid-19 pandemic, but at its slowest pace since the crisis began in March.

The latest monthly data from the Recruitment and Employment Confederation and KPMG showed that permanent appointments and temporary placement both fell at their softest rates for five months as more parts of the economy reopened.

The number of vacancies continues to fall but widespread redundancies is driving a substantial increase in the availability of workers.

James Stewart, vice chair at KPMG, said: “With the softest rates of decline seen for five months, it’s encouraging to see the downturn in recruitment easing as parts of the economy reopen.

“However, we are still a long way from being out of the woods, with hiring plans remaining on ice and the uncertain outlook still weighing heavily on business’ recruitment decisions.

“As the furlough scheme unwinds, unemployment is likely to rise further, proving both an opportunity and challenge for government to create training and skills programmes for jobseekers – and help bring confidence back to the UK workforce.”

It comes as the Bank of England revised down its forecasts on the severity of the impact Covid-19 will have on the economy. The Bank now anticipates the economy to shrink by 9.5% this year, down from 14% in its last forecast.

The UK still faces its hardest recession on record but the Bank expects the UK economy to grow by 9% in 2021, and 3.5% in 2022, with the economy returning to its pre-Covid size at the end of 2021.

Unemployment, said the Bank, would increase to 7.5% by the year-end, almost double the most recent official rate of 3.9%.

According to the REC, staff vacancies declined across each of the 10 monitored job categories in July. The steepest reductions were seen in retail, and the hotel and catering sector. The weakest fall in demand was for engineering roles.

As the furlough scheme unwinds, unemployment is likely to rise further, proving both an opportunity and challenge for government to create training and skills programmes for jobseekers – and help bring confidence back to the UK workforce” – James Stewart, KPMG

The only sectors to register higher temporary vacancies in July were blue collar and construction. Of the eight remaining job categories that registered poorer demand for short-term staff, the steepest decline in vacancies was seen in retail.

Neil Carberry, chief executive of the REC, said: “While permanent placements and temp billings still decreased last month across most areas of the country, the pace of decline has slowed hugely as the tide turned on lockdown. With the economy opening up through June and July, we would expect an improving trend in the coming months as firms recover from the worst of the crisis. The fact that demand is now increasing for temporary blue collar and construction workers is also a good sign.

“There are far fewer vacancies in the market than before March, and more people looking for jobs. Recruiters will be key to helping people build confidence and find work – but the reality is that government needs to help kick-start hiring. Reducing employers’ national insurance rates would cut the cost of hiring, and a good Brexit trade deal will also support stronger business confidence and investment.”

The research also found that weaker demand for staff, budget cuts, and a substantial increase in the supply of labour added further downward pressure on starting salaries. Permanent starters’ pay fell sharply overall, with London recording the sharpest reduction, while the Midlands saw only a mild fall.