Hiring activity growth slows again in July amid increased economic uncertainty, data shows

Experts urge businesses to prioritise their people and staffing strategies amid ongoing economic and labour market turbulence

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UK recruiters have signalled a further slowdown in hiring activity growth in July, research has found.

The data formed part of the latest Report on Jobs by KPMG and the Recruitment and Employment Confederation (REC), which is based on responses from a panel of 400 UK recruitment and employment consultancies between 12 and 25 July this year.

The findings highlighted that amid economic uncertainty, organisations have become cautious around further hiring, with both permanent appointments and temporary billings seeing their slowest increases since March 2021.

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Alongside the slowing of hires, vacancy growth cooled to a 16-month low and recruitment consultancies signalled a further sharp increase in demand for staff during July.

Moreover, as has been the case since March 2021, the supply of workers across the UK dropped again during July. While the reductions were rapid and much quicker than the long-run average, the rate of reduction was still the slowest seen in 15 months. 

Downturns in the availability of both permanent and temporary workers eased compared to the previous month, however recruiters still reported widespread skill shortages, fewer foreign workers available, and a greater hesitancy for candidates to apply for new roles as economic uncertainty sparked concerns over job security.

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Commenting on the reservations seen by organisations and candidates alike, Claire Warnes, head of education, skills and productivity at KPMG UK, said that given the challenging economic outlook, employers were rightly hesitant about their hiring plans, “but to compound this, a lack of suitable candidates and an overall skills shortage in most sectors are keeping starting salaries high”.

As the cost of living crisis continued to bite and more workers chose to remain in roles rather than risk job security, Warnes advised that “a focus on upskilling existing workers and attracting talent remains absolutely essential for UK business to play its part in driving forward the economy".

Despite the fluctuations, Darren Hayman, managing director of Macmillan Davies, emphasised that there was still a very strong demand for talent specifically among the recruitment market.

“Supporting this, we have seen an increase in reward-related positions, showcasing the business importance of hiring,” he said.

 Hayman also said a number of businesses were now hiring into internal recruitment and talent acquisition roles, “demonstrating the need for new permanent talent”.

The survey also reported a broad-based increase in demand for staff across both the private and public sectors as permanent roles in the private sector saw the strongest increase in vacancies. 

When it came to differences between industries, the findings pointed to an upturn in demand for temporary staff in July, with hotel and catering businesses recording the strongest increase in vacancies. The softest increase in demand for short-term workers was seen in accounting and financial.

Kate Shoesmith, deputy CEO of the REC, emphasised that existing labour and skills shortages were restricting opportunities for both the private and public sector to meet consumer demand, warning that “these constraints could cost the UK economy up to £39bn a year if we don’t work to fix these issues now”.

With this in mind, she advised that it was “vital that both the government and businesses start putting their people and their staffing strategies first”.

Shoesmith also reasoned that improved provision of skills training, increased employment from under-represented groups, good transport, childcare, and immigration systems were more important than ever to help strengthen the economy and job market during this turbulent time.