Recruitment Market Update 2023

Bringing you the latest industry updates regarding the temporary and permanent employment market, collecting data sourced from the Recruitment & Employment Confederation (REC), CIPD, KPMG and the Office for National Statistics (ONS). We hope you find it informative and a source of valuable information.

November 2023 Update

Good news for the temporary recruitment market, as the latest statistics from the REC state that temporary billings have once again increased during the month of October.  Temporary average hourly pay also saw a further rise last month.  In the UK, London led with higher temporary billings, at the start of the fourth quarter.

November also sees the latest Labour Market Outlook report released by the CIPD, produced four times a year in February, May, and August, providing analysis on employers’ recruitment, redundancy and pay intentions, combined with unique insights on labour market topics.

Click here for the full report: CIPD Autumn Labour Market Report

Employer confidence in investing and hiring in their own business is also growing month on month.  See REC data below:

Hiring and Economic Activity

The availability of candidates improved for the eighth straight month in October, and at a much sharper rate than in September.  Reports show that redundancies and subdued hiring activity had contributed to the latest increase in staff availability.

Permanent starters’ pay remained on an upward trend in October, with the rate of salary inflation remaining sharp.  Data has identified that employers had to increase pay offers in order to secure suitably skilled staff and to reflect the higher cost of living.

Overall demand for staff stabilised in October, with the number of temporary positions modestly increasing.  However, this increase in demand for short-term workers marked the second-softest improvement since January 2021. 

The number of active job postings in the week of 16-22 October 2023 was 2,150,083, a 7.9% increase compared to the previous week.  While demand has softened, vacancies are still high by historical standards.  See REC data from 2022 for comparison purposes, below:

The net employment balance – which measures the difference between employers expecting to increase staff levels in the next three months and those expecting to decrease staff levels – remains positive at +26.  Net employment intentions are equal in the private and public sector.  The positive net employment balance is driven by employers looking to hire staff (35%), with very few looking to decrease total staff levels (9%).  See CIPD data below:

Stats at a Glance

  • In August to October 2023, the number of vacancies in the UK fell by 58,000 on the quarter to 957,000.
  • There were 229,000 working days lost due to labour disputes across the UK in September 2023; the majority of strikes being in the health and social work and education sectors.
  • UK employment rate decreased by 0.1% on the quarter to 75.7%.
  • UK unemployment rate was largely unchanged on the quarter to 4.2%.
  • Annual growth in regular pay (excluding bonuses) was 7.7% in July to September 2023, among the highest annual growth rates since comparable records began in 2001. 
  • Annual growth in average total pay (including bonuses) was 7.9%.  See ONS Data below:

Topical Data – Increase to National Living Wage

The biggest-ever increase to the National Living Wage was announced by the UK government this month.

The almost 10% pay boost, from £10.42 to £11.44 an hour is the biggest cash increase in the National Living Wage in more than a decade and fulfils the government’s manifesto pledge to end low pay for those on the National Living Wage.  The changes will come into effect in April 2024.

Comparatively, the Real Living Wage Foundation rates for 2023/2024 will be £12 an hour for those outside of London, and £13.15 for those working in the capital.  

Click for full details: Champions of the Real Living Wage

Commenting on the latest employment data: Claire Warnes, Partner, Skills and Productivity at KPMG UK, said:

The jobs market is facing a cyclical challenge – there are people out there who want to work, and there’s a decent availability of candidates, but they often do not have the right skills for the roles on offer. 

This means higher starting salaries are still being offered as businesses compete in the ongoing battle for talent.

October 2023 Update

Stats at a Glance

  • Good news as Temp billings return to growth, however, permanent placements decline at the weakest rate in three months.
  • Staff supply continues to increase resulting in an ease on pay pressure.
  • From July – September 2023, vacancies fell for the 15th consecutive quarter, down 4.2% from April to June 2023.
  • Vacancies decreased by 256,000 in July to September, although they remained 187,000 above pre-coronavirus (COVID-19) pandemic levels in January to March 2020.
  • The number of vacancies in July to September 2023 was 988,000, a decrease of 43,000 from April to June 2023.

Hiring and Economic Activity

There has been a change in data collection from the ONS, due to the response rates to the surveys reducing from 50% to 15% in the last decade. This has resulted in an issue with the reliability of the surveys.

As they migrate to the new data source there will be a period of estimated data until early 2024.

Employee jobs are at a record high of 32.4 million and are 1.6 million higher than pre-pandemic December 2019 levels, while self-employment jobs have not recovered and remain 651,000 below pre-pandemic December 2019.

According to the ONS the number of workforce jobs for June 2023 was 36.7 million, a decrease of 153,000 jobs since March 2023. However, they remain 995,000 above their pre-coronavirus (COVID-19) December 2019 levels. The total number of jobs includes both employee jobs and self-employment jobs, with the latter causing the quarterly decrease. While employee jobs increased by 68,000 on the quarter to June 2022, self-employment jobs fell by 197,000.

In Great Britain, regular pay (not including bonuses) grew at an annual rate of 7.8% from June to August 2023. This rate is among the greatest regular annual growth rates since comparable records started in 2001 and is comparable to prior periods. The average annual increase rate of an employee’s total salary, including bonuses, was 8.1%. The NHS and Civil Service one-time payments made in June, July, and August of 2023 have an impact on this overall yearly growth rate. The Consumer Prices Index, which takes into account owner occupier housing expenses (CPIH), was used to compensate for inflation. In actual terms, this meant that yearly growth for total pay increased by 1.3% and regular pay by 1.1%.

August 2023 saw 119,000 working days lost due to labour disputes throughout the United Kingdom.

The below graph shows positive growth for new job adverts

According to the most recent KPMG and REC, UK Report on Jobs study, hiring decisions were still influenced by uncertainty about the economy’s prospects and growing expenses in September. Although the rate of decline was the lowest in three months, permanent placements decreased once more as businesses were frequently hesitant to commit to permanent jobs. Meanwhile, a slight increase in temporary billings—the largest since April—was fuelled by an improvement in the demand for temporary workers.

When it came to the candidate pool, hiring growth was slower but still noticeable, and recruiters frequently connected this to layoffs. Pay pressures also decreased concurrently, with rates of temporary wage rise and starting salary inflation gradually declining to 30- and 31-month lows.

September saw a softer but still significant decrease in permanent staff appointments, according to recruitment consultancies across the United Kingdom. Panellists stated that because of the continuous state of uncertainty in the economy and efforts to control costs, businesses were still reluctant to make permanent hiring commitments. Meanwhile, a renewed increase in temporary billings at the end of the third quarter was bolstered by a preference for short term staff.

The ONS has published its latest labour market statistics this morning. Neil Carberry, REC Chief Executive, said:

“Throughout 2023, the jobs market has been normalising after the post-pandemic boom. While vacancies are dropping, they remain above their levels of 2019. But sector demand is varying widely and workers are facing having to make more transitions to new areas to find new roles. This transition is a primary driver of rising unemployment – though it is still low by historic standards.

With pay growth at levels not seen for many years, firms will be concerned at the prospect of having to find resources for a second year of significant wage settlements, given low economic growth this year. Businesses can ensure they get the best outcome by ensuring they use their whole benefits package and workplace culture to attract and retain staff, taking advice from their professional recruiters.”  

September 2023 Update

Good recovery news for the economy with the Bank of England’s decision to hold the base rate at 5.25% this month, hopefully this should provide some respite in the cost of borrowing that has had a detrimental impact on some companies over the last year and a half.

To complement this news, the latest data from the REC shares that employer confidence in making investments and hiring decisions remains positive, increasing by 3% in the three months to August 2023 – economic conditions in blue and hiring and investment decisions in turquoise:

Hiring and Economic Activity

At 32.88 million in the period May-July 2023, the UK workforce was 0.4% (135,000) larger than a year earlier. Whilst vacancy numbers have dropped below a million (989,000) for the first time since May-July 2021, they remained 23.5% (188,000) higher than pre-pandemic (Q1 2020) levels.  See below for current numbers of those employed, split by employed, self-employed and temporary candidates: 

Real pay shows a positive annual growth rate for July 2023.  In May to July 2023, total real pay rose by 1.2% on the year. It was last higher in January to March 2022 when it was 1.4%. Regular real pay rose by 0.6% on the year; it was last higher in August to October 2021 when it rose by 1.0%.  See below for data from 2001, including CPIH (the most comprehensive measure of inflation).

New data released from the ONS has identified that there were more than half a million jobs in green industries in 2020 in the UK, compared with 507,000 in 2015. In 2018, there was a peak of 545,000.

A green job is defined as employment in an activity that contributes to protecting or restoring the environment. These can be jobs in green industries, jobs in green occupations or jobs in green firms. 

Click to see view the ONS’s Experimental Estimates of Green Jobs bulletin for more information and details on the approaches to measuring green jobs.

Stats at a Glance

  • The UK employment rate was 75.5% in May to July 2023, 0.5% lower than February to April 2023. The quarterly decrease in employment was mainly driven by full-time self-employed workers.
  • The UK unemployment rate increased by 0.5% on the quarter to 4.3%.  The increase in unemployment was driven by people unemployed for up to 12 months.
  • Payrolled employees for August 2023 is largely unchanged at  30.1 million.
  • Economic inactivity increased by 0.1% on the quarter to 21.1%.  Those inactive because of long-term sickness, increased to another record high.
  • In June to August 2023, total vacancies were down by 64,000 on the quarter to 989,000.
  • There were 281,000 working days lost because of labour disputes in July 2023.  The majority of the strikes were in the Education and Health and social work sectors.

Topical Data – AI

The latest survey data from the REC regarding the use of AI:

Just 7.7% of UK hiring organisations currently use AI tools to help with recruitment – and, far from the practice being confined to high-volume employers, uptake is broadly similar across small, medium and large organisations.

In addition to a further 3.2% who are certain that they will introduce AI tools in the next 12 months, a further 15% have not ruled out doing so. As such, there is the potential that – beyond the 10.9% who will be using AI technologies within their recruitment processes within the
next year – more than a quarter (25.9%) of UK employers could be.

Topical Data – Umbrella Legislation

As a member of the REC, Signature Recruitment is kept up to date with the latest consultations held with the government regarding proposed legislative changes.  

The REC is calling on the government to stay focused on regulating umbrella companies and to scrap their unfair proposal to pass the buck of umbrella tax debt to employment businesses.

The REC responded to the consultation in which the Treasury suggests ways to lessen tax non-compliance such as fraud and disguised remuneration by umbrellas. Among the suggestions is transferring an umbrella company’s payroll tax debt to employment businesses if the debt
is uncollectable from the umbrella. The Treasury is even considering widening this proposed policy to include non-employment taxes such as VAT.

Topical Data – U-turn on Net Zero Policies and Deadlines

Commenting on the latest announcement of changes to several key Net Zero policies, Shevaun Haviland, Director General of the British Chambers of Commerce, said:

“If we are to meet the challenge of making the UK Net Zero by 2050 then we must have pragmatic goals, that business can be confident they will be supported to reach.

“Companies want to address climate change but cannot plan for future investment if the sands keep shifting.

“This means political consensus about the goals, combined with pragmatism on the solutions. Constant tinkering with Net Zero policies will only have further negative impacts on business confidence and investment plans.

“Other countries and trading blocs are pouring billions into low-carbon technology, and we are getting left behind.

“But if we get this right, and play to our country’s strengths then there is huge opportunity for UK Plc. It is vital we have a long-term Net Zero strategy which Government must demonstrate it can stick to.”

August 2023 Update

Better news for the employment market as the latest data indicates greater confidence amongst hiring companies, than last summer.  Last August saw the onset of a slowdown in hiring that coincided with peak inflation and rises in the cost of capital for firms.  This new data suggests that organisations are much more active than last year as the number of new job adverts posted during August remains robust, and every region in the UK is experiencing growth, with 28.8% more new jobs on the market than last year (8-14th August 2022).

Alongside this, the recruitment market is still experiencing significant labour shortages, impacting several industries across the country.  Factors such as skill gaps, Brexit, an ageing population, and lack of confidence about certain sectors contribute to the scarcity of qualified workers.

Hiring and Economic Activity

The most recent Labour Market Outlook issued by the CIPD in August reports that almost three-quarters (73%) of employers plan to recruit in the next three months.  Recruitment intentions remain highest in the public sector (83%), followed by the voluntary sector (76%) and the private sector (70%).  See below:

Data from the ONS shows that annual growth in regular pay (excluding bonuses) was 7.8% in April to June 2023, this is the highest regular annual growth rate seen since comparable records began in 2001.

In the latest period, the finance and business services sector saw the largest annual regular pay growth rate: