Starting Salaries for Permanent Staff are Growing at a New Record Pace…
When the Pandemic hit in March 2020, the Permanent Placements Index stood at just over 50, before it plunged to an all-time low of below 10. Fast forward to March 2022, 2 years on from the onset of Covid and the Permanent Placements Index is hovering in the mid-’60s. Whilst the fact that companies are hiring remains a positive stance, labour and skills shortages mean there’s no end in sight to the deep-seated workforce challenges facing the UK economy.
Permanent and Temp Placements Slowed in March
The latest survey data from KPMG and The Recruitment and Employment Confederation pointed to softer expansions in both permanent staff appointments and temp billings across the UK in March. The Permanent Placements Index signalled an increase in permanent staff appointments across the UK for the thirteenth successive month in March. However, the rate of growth slipped for the fourth month in a row and was the slowest since March 2021. The Midlands registered the sharpest increase in permanent placements of all four monitored English regions with London running at second place.
Vacancies Continue to Rise
The seasonally adjusted Total Vacancies Index posted well above the neutral 50.0 level at 71.2 in March, signalling a sharp and accelerated rise in overall vacancies across the UK. The strongest expansion in demand was signalled for permanent staff in the private sector and the ONS reports that vacancies were up +114% to 1,318,000 when compared to the same period a year ago. Pre pandemic, the ONS reported 811,000 vacancies in the three months to February 2020.
Hiring is strong across all sectors monitored, with IT & Computing, Accounting/Financial and Engineering recording the steepest increase in demand for permanent staff. The softest rise in both permanent and temporary staff demand was seen in Retail.
Candidate Supply Continues to Decline
Candidate availability dropped below the neutral 50.0 threshold at 31.9 in March, down slightly from 32.0 in February, to signal a further steep drop in overall candidate supply. Candidate availability has now fallen in each of the past 13 months and demand for workers continues to outstrip supply amid a low unemployment rate. The sharpest fall in permanent candidate numbers was seen in London with reports that people are reluctant to switch roles due to uncertainty related to the pandemic and the Ukraine war.
Starting Salary Inflation Hits Record Highs
Average salaries awarded to new permanent joiners increased substantially during March. Approximately 58% of hiring managers noted higher starting salaries with London seeing rapid increases from 76.9 on the Permanent Salaries Index in February to 78.9 in March. Data from the ONS showed that employee earnings (including bonuses) rose +4.8% year-on-year in the three months to January 2022.
Whilst it is heart-warming to see that the UK economy has bounced back from the shock of the pandemic, with GDP back to the levels seen in Q4 2019 and unemployment back to just 3.9%, we now have the threats of rising inflation and the cost-of-living crisis to contend with. While no one can be sure as to how much prices and earnings will rise, the Russian-Ukrainian war has further disrupted supply chains and pushed inflation up, affecting living standards even more across Europe. Although many businesses are doing what they can on pay, rising inflation is seriously impacting their ability to do so and a more sustainable strategy to ease the pressure on the economy and keep inflation down will be to focus on ensuring employment rates and hours worked recover to pre-pandemic levels.