Business Maverick

Business Maverick

UK companies curtail hiring as economic outlook turns gloomy

UK companies curtail hiring as economic outlook turns gloomy
Commuters cross London Bridge in view of the Shard skyscraper in London, UK, on Monday, Jan. 16, 2023. (Photo: Jason Alden/Bloomberg)

Permanent hiring activity by UK firms fell for the fifth consecutive month in February as economic gloom weighed on recruitment, a key survey found.

Employee appointments slipped at a slightly quicker pace than in January, according to the report from consultancy KPMG and the Recruitment & Employment Confederation, hinting that pressure in the labour market may be starting to ease.

But growth in the number of job vacancies hit the highest since October, suggesting there is still demand for workers. Meanwhile, candidates remained in short supply, and rates of starting pay continued to rise sharply, in a sign that inflationary pressures are persisting.

“The current economic outlook continues to impact hiring activity as employers keep playing the short game by focusing on temporary hires,” said KPMG partner Claire Warnes.

“Despite the rate of vacancy growth picking up to the best recorded in four months, candidate shortages remain, with recruiters citing hesitancy to move roles and longstanding, systemic skills shortages.”

Warnes said these factors “continue to play into pay inflation as employers try to compete with the rising cost of living”.

Tightness in the labour market since the end of pandemic lockdowns has been contributing to Britain’s red-hot inflation rate, which is still bordering on 41-year highs at 10.1%.

The Bank of England has been bumping up its key interest rate at an unprecedented pace, hoping to get the cost-of-living crisis under control.

But so far, this has failed to translate into large numbers of redundancies, which the BOE thinks may be needed to get inflation back to its 2% target. Wealthier households who have been less affected by rising energy and food bills are still spending, and companies which faced a battle to recruit over the past year are reluctant to let staff go.

While permanent hires were lower, temporary billings continued to rise. “As [employers] work out what variable economic forecasts might mean for their business and staff, it makes sense that we continue to see temp billings hold up so well,” said REC deputy chief executive Kate Shoesmith. “Serious labour and skills shortages are not behind us.” BM/DM

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