UK companies are increasingly opting to hire temporary workers instead of permanent staff due to low confidence in the economy and higher cost pressures, according to a new report from KPMG and the Recruitment and Employment Confederation (REC).
Sharp Decline in Permanent Recruitment
Recruiters reported a strong increase in offers of temporary roles in May, while permanent staff recruitment saw its quickest fall in 10 months. Political turbulence in the UK and the ongoing conflict in the Middle East have deterred businesses from permanently increasing their headcount, highlighting the fragile state of the UK jobs market.
Neil Carberry, chief executive of REC, said: "With businesses tapping the brakes on permanent hiring in the face of higher costs, the Gulf crisis and new employment red tape, temporary work is making up the gap."
Rising Candidate Volumes
Redundancies, a decrease in job opportunities, and concerns over job security have increased the number of candidates applying for roles, according to the 400 UK recruitment and employment consultancies surveyed in mid-May. The combination of higher candidate volumes, lower demand for staff, and tighter budgets meant that salaries for those starting out in the workforce and temporary workers rose only modestly in May compared with a month earlier.
Sector Variations
The nursing, medical, and care sector was the only monitored part of the economy to register higher demand for permanent staff. In contrast, the sharpest drop in permanent job positions was in the retail sector.
Broader Economic Context
The unemployment rate unexpectedly rose to 5% in the three months to March, while wage growth has slowed, according to official figures. This comes shortly after an important government-backed report warned that the number of young people not working or studying had surpassed a million for the first time in more than a decade. Business leaders, such as Simon Wolfson, boss of retailer Next, have cautioned that a "dramatic fall" in the number of entry-level jobs is driving up youth unemployment.
Jon Holt of KPMG said: "Ongoing global and domestic uncertainty is making businesses more cautious and that is increasingly reflected in hiring decisions. While some employers are turning to temporary contracts to retain flexibility, many permanent hiring plans are being delayed or put on hold."
