Despite the many gloomy predictions of a global economic slowdown that have occupied some pundits since Christmas, the British economy appears to remain robust. The number of people moving into permanent job placements increased throughout March and April, although the rate of growth is the lowest it has been for more than six months. The biggest factor responsible for the continuing decline in the nation’s unemployment figures is a massive increase in the number of temp vacancies.

What does this trend say about the UK job market, and the relative strengths of permanent versus temporary staff, for businesses looking to employ new people?

Variation between regions

In England, permanent job placements increased across all four main regions of the country, with the largest number of vacancies appearing in the North and the fewest in London. Here in the South West we saw a steady growth of permanent job placement, in line with the trend of the last few months.

The growth of temp vacancies was also subject to regional variation. While sharp increases were noted throughout the country, it was the East and West Midlands that saw the largest growth in temporary job placements.

Are salary increases reducing the demand for permanent placements?

Looking back at March and April, it is clear that starting salaries for permanent positions are increasing steadily, maintaining the faster pace of growth we began to notice in January and February of this year. Although no studies have yet been carried out, it is possible that increases in salary expectation correlate with the reduced number of permanent placements becoming available.
Businesses looking to expand are weighing up their options in the face of increased recruitment and HR expenses for permanent staff. If the trends are projected forward a few months, it would not be unreasonable to expect a slowdown in the rate of starting salary increases, followed by a renewed increase in the number of permanent placements.

So, why are businesses choosing temporary staff in place of permanent recruits, and what are the factors behind this?

One thing is for sure, salary cannot be the only factor behind the UK’s growing preference for temporary contracts, as the rate of pay for temps and contractors has also drastically increased over the past three months. Part of this is no doubt linked to the introduction of the National Living Wage, but it also reflects increased demand for technical, highly skilled workers in the Digital, IT and engineering sectors.

Our take on the matter is twofold: With the uncertainty posed by the as yet unresolved Brexit question, employers are hedging their bets by pursuing expansion while still giving themselves the freedom to quickly respond to any changes in the political and economic situation over the last few months. Also, more and more businesses are coming round to see the strengths of highly skilled contractors to fill specific business needs and overcome project related skills shortages in their companies, without the higher overheads associated with permanent placements.

Whatever happens, the British economy is still looking strong, and it is a good time for businesses to expand. To discuss the relative merits of permanent or temporary staff for your business, give one of our recruitment specialists call and we’ll be happy to discuss how we can help.

Tricia Hay

Tricia Hay is Owner, Director of First Base Employment Limited