Permanent appointments fell sharply in May, as employers remain reluctant to commit to long-term hiring amid economic uncertainty. However, the pace of decline in temporary staff billings was the softest recorded in six months, offering a slight measure of stability in contingent hiring.
That’s according to the latest KPMG and REC UK Report on Jobs, which shows a continued decline in UK recruitment activity during May, with permanent placements dropping further and temporary billings also decreasing, though at a slower pace.
The report, compiled by S&P Global based on responses from around 400 recruitment consultancies, notes weak employer confidence and ongoing cost concerns as key factors affecting hiring decisions. The data show that redundancies and fewer job openings are contributing to an expanding pool of jobseekers, with the sharpest rise in candidate supply since late 2020.
Candidate availability amid rising redundancies
May saw the fastest growth in candidate availability for nearly four and a half years. Both permanent and temporary candidate supply expanded, with recruiters citing recent redundancies and reduced job opportunities as contributing factors. This influx of candidates has not been matched by demand, as employers remain cautious about increasing headcount.
While vacancies continued to fall, the rate of decline was the slowest in eight months. Both permanent and temporary roles saw softer reductions in demand compared to previous months, suggesting that the worst of the contraction may be easing. Despite this, the report still describes the rate of decline as “solid”.
Jon Holt, Group Chief Executive and UK Senior Partner at KPMG, commented on the findings, saying, “May’s data shows very little change. Employers are still holding back on hiring, which meant last month the number of jobseekers increased at the steepest rate since 2020. The first half of this year has been full of uncertainty for businesses who are still trying to navigate cost pressures, technology advancements and global risks.”
He added that confidence will depend on clarity around new trade agreements, government spending priorities and how upcoming industrial strategies will support economic growth.
Wages rise but remain below trend
Starting salaries for new permanent roles increased in May, with recruiters noting that competition for skilled talent was driving pay offers upwards. Temporary wage growth also strengthened, reaching a one-year high. However, pay growth remained below historical trends, reflecting the broader economic uncertainty and limited capacity of many employers to raise salaries significantly.
The sharpest fall in permanent placements occurred in the South of England, while the Midlands showed signs of recovery, recording a marginal rise in placements for the first time in a year. Temporary billings declined in three of the four English regions, with only the Midlands seeing an increase.
Sector analysis reveals that demand for permanent staff fell in seven of the ten job categories monitored, with Hotel and Catering experiencing the steepest decline. Nursing, medical and care roles, along with retail, also saw notable reductions. Engineering was the only sector to register an increase in demand for both permanent and temporary workers.
Outlook for employers and HR leaders
Neil Carberry, Chief Executive of the REC, noted some positive indicators. He said, “More encouraging signs in temp billings, vacancies and stabilising private sector demand offer a measure of optimism as we head into the second half of the year. There are early signs of promise, particularly in the Midlands, which saw its first increase in permanent placements in a year.”
However, Carberry cautioned that meaningful recovery will depend on government action.
“The big test now is whether the Spending Review convinces more employers to dance at the party by turning intent on hiring and investing into action. The Spending Review delivered a big hit in terms of eye-catching spending on technology and energy, but the lack of announcements on workforce matters is badly out of step with its desire to build a deep pool of talent.
“Businesses are looking for more than talk of renewal, they want a clear plan for an economic revival. That means putting workforce matters at the heart of the agenda, not treating it as a compliance issue.”
