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Strong vacancy growth and sharp falls in candidate numbers lead to rapid pay inflation

Posted on 23/11/2021 by Jim Cassidy


We were very pleased to take part in the UK Jobs Report conducted by KPMG and the Recruitment & Employment Confederation. We have contributed to these reports for for several years and we are always pleased to lend our expertise and experiences to support market research into recruitment. The full report can be accessed by following this link.

We can attest that the rate of permanent and temporary placements has rocketed up since the unlocking of London’s economy at the beginning of the summer. The demand for both permanent and temporary staff remains at an incredibly elevated level, while we have continued to note an increased demand for permanent staff in London, as has been the case for the last eight months. This is the case for all English regions, as noted within the report, however London has experienced by far the largest increase in the country followed by the North of England. Temporary placements have also rocketed up over the last year, similar to the rate of permanent placements. This report notes that the rate of temporary placements remains very high in London while this has eased slightly over September and October compared to the rest of the UK and the heights of the summer. However, demand for temporary staff remains well-above average.

Staff availability remains significantly out of step with jobs in London, where the availability of permanent staff continues to plummet. There is a multitude of reasons why this fall in staff supply is persisting from Brexit, the lingering effects of the exodus of foreign workers during lockdown and an unwillingness for staff to move jobs. Similarly, the supply of temporary staff remains exceptionally problematic for the recruitment sector for the same reasons, albeit there is also a desire among some workers to remain in permanent positions. This report notes that this staff shortage does affect certain skill sectors greater than others, with Finance, IT, and Sales skilled individuals in short supply for permanent staff and Catering, Retail, and Dutch speakers among others.

As you could conclude from a situation with a high number of vacancies and a low supply of skilled staff, there now exists significant pay pressures and starting salaries in most (but not all) sectors have continued to rocket to an exceptionally high level. This rate of salary inflation for permanent staff is, as noted in the report, second only to the record posted in July. This increase in pay rates is mirrored in the temporary work sector, where rates have increased at their sharpest pace in more than 23 years. Converse to other London pay trends, the month-on-month inflation rate of temporary salaries is the slowest of the English Regions, albeit this is still at a significant level.

Overall, the jobs sector continues well on the track to recovery with near-record demand for both permanent and temporary staff. A noticeable decline in the supply of available candidates has resulted in employers offering higher salaries to attract and secure talent. This is not a long-term solution and presents significant issues for business, especially for SME business.

- James Cassidy

020 8246 4877


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