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KPMG AND REC, UK REPORT ON JOBS

Record rise in starting salaries as candidate availability falls sharply

Record rise in starting salaries as candidate availability falls sharply

Key findings

  • Supply of workers plummets, driving stronger increase in starting pay
  • Permanent placements and temp billings both rise rapidly
  • Vacancies expand at record pace

Data collected July 12-26

Summary

Recruitment activity continued to rise sharply across the UK at the start of the third quarter, according to the latest KPMG and REC, UK Report on Jobs survey. Permanent staff appointments and temp billings both rose at near-record rates, while growth of demand for staff hit a fresh series high as COVID-19 restrictions eased further and economic activity continued to pick up.

However, the availability of candidates continued to decline rapidly in July, driven by concerns over job security due to the pandemic, a lack of European workers due to Brexit, and a generally low unemployment rate. As a result, pay pressures intensified, with starting salaries rising at the fastest rate in the survey history, and temp pay inflation also accelerating notably on the month.

The report is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

Further marked upturn in recruitment activity

Robust demand for staff and the further rollback of pandemic restrictions led to a sharp increase in the number of people placed into permanent job roles in July, with growth easing only slightly from June's all-time record. Temp billings meanwhile expanded at the quickest rate since June 1998.

graph-2-BRC

Starting salaries increase at quickest pace on record...

Rising demand for staff and a further marked drop in candidate supply led permanent starting salaries to increase at a quicker pace. Notably, the rate of salary inflation was the sharpest seen in nearly 24 years of data collection. Moreover, temporary/contract staff hourly pay rates rose at the second-quickest rate since the survey began.

...amid unprecedented rise in demand for staff...

Latest vacancy data indicated faster increases in demand for both permanent and temporary workers in July. Growth of demand for permanent staff hit a fresh series record, while the upturn in temporary vacancies was the steepest since November 1997.

...and sharp drop in candidate supply

Ongoing uncertainty stemming from the pandemic and concerns over job security contributed to another severe drop in candidate availability in July. Brexit was also cited as a key factor reducing the supply of workers, particularly temporary staff. Overall, candidate numbers fell at the second-sharpest rate in the survey history, easing only slightly from June's record. 

Regional and Sector Variations

Data broken down by region showed marked increases in permanent staff appointments across all four monitored English regions. London saw by far the quickest expansion, which was the fastest on record.

The faster increase at the national level was supported by stronger rises in temp billings in London and the Midlands. Growth meanwhile softened in the South and North of England, but remained robust overall.

Stronger increases in vacancies across the private sector offset softer rises in the public sector during July. In the private sector, demand for permanent staff expanded at a slightly quicker pace than for temporary workers. In contrast, short-term vacancies rose more quickly than permanent roles in the public sector.

Demand for permanent staff rose across all of the ten monitored job categories during July, led by IT & Computing. Nonetheless, vacancy growth remained marked elsewhere. The softest expansion in demand was signalled for Retail workers.

July survey data signalled a broad-based upturn in demand for temporary workers. Blue Collar remained at the top of the rankings, followed closely by Hotel & Catering. As was the case for permanent vacancies, Retail saw the softest rise in demand.

graph-1-summary

Comments

Commenting on the latest survey results, Claire Warnes, Partner and Head of Education, Skills and Productivity at KPMG UK, said:

“With salaries for new hires increasing at their quickest rate in 24 years and a sharp rise in permanent placements in July, job seekers should be taking advantage of the buoyant market to land their dream role.

“But while companies want to invest in their business now restrictions are lifting, demand for new staff still outstrips supply due to low candidate availability. We know that reskilling and upskilling is needed to help people move between sectors, and there’s no doubt the ‘pingdemic’ has added an extra dimension to the recruitment challenge. Plus, with furlough due to end soon, there may be a downward pressure on pay to come.

“That’s why after a tough 18 months, businesses are now hoping for some much-needed stability in the labour market so they can focus on recovery and growth.”

Kate Shoesmith, Deputy Chief Executive of the REC, said:

“This month’s data confirms that it is a good time to be a looking for a new job. Employers are desperate to find good candidates for the many jobs on offer and this is reflected in starting salaries rising at the sharpest rate since the survey began in 1997. This will likely motivate more people to be on the lookout for new opportunities. The same goes for those on temporary contracts which are also seeing increased pay. Recruiters are working hard to fill places for employers eager to build back and recover but their job is made more difficult by worker shortages across all sectors.

“Pay increases alone, however, won’t solve the demand that has been building up over recent months. We need an immigration system that flexes to meet demand as was promised, and business and government need a long-term plan for skilling up workers. Skills shortages have been with us for a while and as our data shows are getting worse.”

 

Contact

 

KPMG

Tanya Holden

+44 (0) 203 078 3996

tanya.holden@kpmg.co.uk

REC

Josh Prentice

Comms Manager

T: +44 (0)20 7009 2129

josh.prentice@rec.uk.com  

 

IHS Markit

Joanna Vickers

Corporate Communications

Telephone +44 207 260 2234

joanna.vickers@ihsmarkit.com

 

IHS Markit

Annabel Fiddes

Economics Associate Director

+44 (0)1491 461 010

annabel.fiddes@ihsmarkit.com

Methodology

The KPMG and REC, UK Report on Jobs is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies. 

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

Underlying survey data are not revised after publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.

For further information on the survey methodology, please contact economics@ihsmarkit.com.

Full reports and historical data from the KPMG and REC, UK Report on Jobs are available by subscription. Please contact economics@ihsmarkit.com.

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 21 offices across the UK with approximately 16,000 partners and staff.  The UK firm recorded a revenue of £2.3 billion in the year ended 30 September 2020.

KPMG is a global organization of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 147 countries and territories and has more than 219,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

About REC

The REC is the voice of the recruitment industry, speaking up for great recruiters. We drive standards and empower recruitment businesses to build better futures for their candidates and themselves. We are champions of an industry which is fundamental to the strength of the UK economy. Find out more about the Recruitment & Employment Confederation at www.rec.uk.com.

About IHS Markit

IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.

IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2021 IHS Markit Ltd. All rights reserved.

Disclaimer

The intellectual property rights to these data are owned by or licensed to IHS Markit and/or its affiliates. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. IHS Markit is a registered trademark of IHS Markit Ltd and/or its affiliates. 

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