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LONDON JOBS MARKET FACES ECONOMIC CHALLENGES �Ĕ�ĉKPMG/REC/BUSINESSLDN REPORT

• London taking the brunt of looming recession, as permanent placements fall
• Salaries growing, though at a slower pace
• But some optimism with 1 in 5 hiring managers expecting to increase permanent recruitment

Challenging economic circumstances, from high inflation to rising interest rates, have impacted London’s jobs market, but recruiters are still bullish about the medium term. That’s according to the latest data from the KPMG and REC London labour-market pulse check, supported by 91����.

The report, based on data from S&P Global and the responses from 100 recruitment consultancies in the capital, shows that growing economic concerns are weighing heavily on permanent placements, which have fallen in the capital. This was signalled by the index posting 44.4 in November, down from 55.1 two months earlier.* 

Growth in permanent vacancies eased (with the index at 51.5 in November, down further from 57.1 two months earlier), with growth at its softest rate for nearly two years as fewer jobs came on to the market. Permanent salaries (index reading at 61.7 in November, down from 72.5 in September) are also growing at a softer rate, but broadly in line with the UK average.

Looking at separate data for the capital from REC’s , recruiters see the future more positively. While a growing number (15.6%) think there will be a decrease in hiring permanent members of staff (up from 9.9% in August), 1 in 5 predict an increase in the next four to 12 months (21.2%, up from 19.7% in August), with the education, and health & social care sectors, expecting the biggest hiring boosts.

91���� is calling on the Government to make a series of targeted interventions to boost labour market inclusion to encourage more economically inactive people and those who want to enter the labour market to be able to do so. This includes the creation of a London Careers Service to create a one-stop-shop to allow Londoners at all stages of their careers to receive high-quality independent advice on careers and training; reforming the apprenticeship levy to boost take up; ensuring the benefits system incentivises people to work and train, as well as taking steps to increase the affordability and availability of childcare.

Other key findings:

• Recruiters register the softest increase in starting salaries for a year and a half, with the respective index slipping to 61.7 in November 
• Both growth in temporary (index at 55.1, down from 57.8 in September) and permanent (51.5, down from 57.1) vacancies in the capital slowed in the last quarter, both sitting at their lowest in nearly two years
• Sectors that are likely to report an increase in hiring for permanent positions are engineering (33.7%), health and social care (42.7%), and education (43%).

Commenting on the findings, Anna Purchas, Senior London Office Partner at KPMG UK, said: ​“London employers are facing into the economic headwinds with cautious optimism, hoping for a short, and shallow recession. As a driver of economic growth, it’s important that employers remain confident and have the tools in place to seize on the upturn when it comes. With staff shortages and declining candidate availability for vacant roles, a long term and sustained focus on investing in skills, including reskilling existing staff will be key in order for our businesses to be able to grow and continue to be world leading.”

Kate Shoesmith, Deputy Chief Executive, Recruitment and Employment Confederation, added: ​“The London jobs market is following the trend of the rest of the UK with employers more cautious in the face of economic uncertainty. Despite the insecurity, there is some hope on the horizon as hiring managers are optimistic about an increase in permanent placements in the new year. A flatter period in the London labour market is understandable in this current economic climate, but demand is being supported by some major underlying factors, including labour shortages and technological change. The main way to boost performance is to unlock growth by businesses putting their people planning first, as a strategic way to enhance productivity. Government can also help through skills and immigration reform.”

Muniya Barua, Deputy CEO at 91����, said: ​“The capital’s job market is still holding up in the face of challenging economic circumstances, but recessionary pressures are starting to bite. ​“With skills shortages still rife, the Government needs to do more to get Londoners into available jobs, including addressing the need for high-quality careers advice for all ages and reforming the apprenticeship levy. That needs to go hand in hand with broader measures to support firms through this volatile period �Ĕ�ĉfrom redoubling efforts to resolve industrial action to help for businesses facing sky-high energy bills.”