“Hire or Not Hire” – that is the question? Or in recruitment terms “Invest in new people or AI?”
Overview
The impact of quantitative tightening on the British economy is starting to be felt, with Real Estate feeling the pinch. For example, HSBC recently downgraded their forecast on the share prices of eleven property companies; none are now recommended as a buy. This includes companies such as British Land and Hammerson.
London has been harder hit than the rest of the country, with vacancies across all industries down 38.2% on last year, (regionally -18%.) Given the boom of recruitment in 2022, the slowdown in the first half of 2023 should have been expected. For context, in 2022, there were more professional vacancies posted in London than in any other year going back two decades.
The challenge facing policymakers is how to ensure the slowdown doesn’t become a recession. The economy remains sluggish as the UK economy shrank by 0.1% in May after growth of 0.2% in April. However, given the rampant inflation hitting the UK economy, some believe the only way to bring it under control will be via a recession.
The current trajectory of interest rate increases, suggests policymakers are prepared to accept that. The fact that this is their stance, in many ways makes it more likely that this could happen. Perhaps no surprise then that the correlation of vacancies drops as interest rates rise through Q1 and Q2. Across all industries and all major job functions, there has been a 24% dip in vacancies in Q2 2023 compared to Q1. This means that while activity now is broadly mirroring what we saw in 2019, before COVID hit, if the decline in vacancies continues, we will start to drop to levels not seen in over a decade.
Skills in Demand
IT continues to be the leading area being recruited for, regardless of the crunch hitting the industry. In 2022, IT vacancies accounted for a substantial 31.5% share of the overall professional vacancy total. However, such is the dip in activity this year, the share has dropped to 26.1%. Indeed, IT is on track for a dip in vacancies of 48.9% year on year. Marketing held the second-largest share of vacancies in London, accounting for 19.5% in 2022. This field experienced a surge of 14.7% during that year. However, the 2023 projection predicts a negative year-on-year change, with a significant drop of around -43.7%. As a result, the share of total this year has dropped to 17.8%.
While we have seen all areas drop year on year, it is Accounting & Finance that has seemingly held up best amongst the main professional categories. Despite a dip of 30.8% this year compared to last, the share of the total has risen from 6% to 6.8%. In contrast, Sales is expected to witness the biggest drop, with a potential -51.9% decrease in vacancies as companies cut back on their forecasts.
Meanwhile, specialist front and middle office roles in Banks are holding up better than most areas. As a result, while vacancies are down by a bit over a third, this is still less than most of the other major areas. Finally, despite quantitative tightening, professionals specialising in Real Estate Profession appear to be the least affected with only a slight dip of -6.8%. The question is whether we see a sharp dip in the coming months, or whether levels remain steady. What happens here is a good bellwether for the London economy.
Sectors
The Technology, Media & Telecoms (TMT) industry took centre stage in 2022, reaching its peak with a remarkable total of 99,164 job vacancies. This sector held a significant share of 42.9% in relation to the overall job market, however, such has been the slowdown, that 2023 is on track to see a drop of 61.7% making it the biggest fall across the industry. As a result, it now accounts for a much reduced 26.6% share of the vacancy total. Financial Services ranked second in 2022 and 2023, where the current forecast for this year is a decrease of 24.7%. Factor in that such is the drop across other industries, the share of jobs in Financial Services has risen from 20.6% last year to 25.1% this year. By sector, this means that Banking has overtaken Technology as the leading segment in terms of vacancies, so far this year. Banks have accounted for 17.5% of the vacancies year to date, compared to 15.5% within Technology companies.
Media companies as well seem to be under pressure, with vacancies down 56.3% on last year. Surprisingly, the Real Estate industry has so been least affected in recruitment terms, with 2023 volumes down 15.4% on last year. The question will be whether this trend continues for H2 or if the impact of quantitative tightening starts to result in a sharper fall in recruitment. Interestingly, the Public Sector/Non-Profit (NFP) sector continues to recruit and grow. In 2022, we witnessed year-on-year growth of 28.2% and this positive trend is expected to continue, with a projected increase of 34.8% in 2023. As the job market evolves so is the composition of the workforce by industry. Consider that even if Technology companies are slowing down, the share of jobs in other IT industries has never been higher.
The job market in London is poised for some interesting developments in 2023, particularly within the tech and finance sectors. Amazon, a prominent player in the tech industry, experienced a remarkable 54% increase in professional vacancies during 2022, resulting in a significant total of 5,756 job openings for the London region. However, the forecast for 2023 suggests a sharp decline of 90%, with annual totals projected to remain below 1,000 at 578 vacancies.
This sudden drop indicates a potential shift in Amazon’s hiring strategy and market conditions. On the other hand, Turner & Townsend (headquartered in Leeds, a global consultancy specialising in real estate) saw an impressive year-on-year change of 107.5% in 2022. While the projected increase for 2023 is relatively minor at approximately 22.9%, it demonstrates the company’s consistent growth and stability. Lloyds Banking Group, a key player in the Banking sector, amassed an impressive number of vacancies, totalling almost 2,000 (1,971) during the January to June period of 2022-23. The company witnessed a substantial 71.6% surge in vacancies in 2022. Looking ahead to 2023, Lloyds is projected to have a year-on-year change of 17.6% in professional vacancies this year too. A similar trend can be observed for NatWest Group, with a productive 2022 and a slightly higher projected increase of 25.3% in professional vacancies for 2023.
Conclusion
In conclusion, the job market in London for 2023 is likely to witness contrasting trends across various sectors. While some companies may experience a decline in vacancies, others are expected to maintain positive growth. With that in mind, consider that of the top 20 companies in London in terms of vacancies last year, only 4 have seen an uplift in 2023 so far. Working with companies still growing therefore will be a key part of making 2023 a successful one.