Low Candidate Availability as Vacancies Soar: UK Employment Insights for May 2021

Jo Thompson Recruitment contributes to the Report on Jobs, a comprehensive guide on the UK labour market that is drafted by KPMG and the Recruitment & Employment Confederation (REC), compiled by IHS Markit. The monthly report is built upon survey data from recruitment consultancies and employers, who share insights on the latest and most pressing labour market trends.

National Trends

According to Kate Shoesmith, Deputy CEO of the REC, the most pressing issues in the job market right now are skills and labour shortages, which have come into sharper focus because of the high demand and low supply of candidates.

Indeed, the further easing of Covid-19 restrictions and opening up of hospitality and leisure sectors led market confidence to bounce back significantly, with the demand for workers in May increasing for the third consecutive month at the fastest rate since January 1998. Amongst the four monitored English regions, IHS Markit reported that the North of England saw the steepest rise in permanent staff appointments.  

The demand for permanent employees increased across all 10 job sectors monitored by KPMG, the REC, and IHS Markit. The IT & Computing and Hotel & Catering sectors saw the steepest expansion, followed closely by the Engineering and Accounting & Financial sectors. The Retail sector saw the softest increase.

Overall, there was a higher number of permanent vacancies in the private sector than the public sector, though the upturn for permanent staff in the public sector was sharp overall.  

Courtesy of IHS Markit, KPMG, and the Recruitment & Employment Confederation

Temporary vacancies also expanded at the quickest rate in 23 years. The Blue-Collar sector saw the highest increase in demand for short-term workers, followed closely behind by the Hotel & Catering sector. The Temporary Vacancies Index noted marked increases across the other eight monitored job categories.

Temp billings saw a rapid increase in May, with the sharpest upturn seen since February 2015. Recruiters attributed this increase to the easing of Covid-19 restrictions and higher demand for temporary staff across various sectors. The North of England saw the steepest rise in temp billings, followed by the South of England, while the Midlands saw a modest rate of growth and London’s billings remained stagnant.

Courtesy of IHS Markit, KPMG, and the Recruitment & Employment Confederation

Despite the clear uptick in demand for permanent and temporary employees, staff supply declined for the third month in a row at the sharpest rate since May 2017.

Recruiters conjectured that a combination of skills shortages, continued pandemic uncertainty, and the furlough scheme had impacted the supply of permanent candidates. All four English regions saw a notable decrease in staff availability, with the North of England recording the steepest decline.

Short-term staff supply fell for the third consecutive month in May, with the rate of decline the sharpest since November 1997. Recruiters explained that the decrease could be due to fewer EU workers, changes to IR35 legislation, the continuance of the furlough scheme, and workers’ hesitancy to seek out new roles because of pandemic uncertainty.

Meanwhile, the competition for a scarce pool of permanent candidates led to a further increase in average starting salaries in May, with the quickest rate of growth since September 2018. The South of England marked the steepest increase in starting salaries, while London saw the softest growth.

Pay for temporary staff also increased at the quickest rate in 23 months, driven by increased demand for staff and a diminished candidate pool. Temporary wages rose across all four English regions, led by the South of England.

Insights for the South of England

Recruitment consultants noted that permanent staff appointments in the South of England rose for the third month running in May, with the highest rate of growth since August 2014. However, permanent placements were slightly higher at the national level. The uptick in placements was contributed to increased market confidence following the easing of pandemic restrictions.

In May, the south also experienced the sharpest increase in temporary billings since June 1998, with expansion exceeding the national average.

Courtesy of IHS Markit, KPMG, and the Recruitment & Employment Confederation

However, there was a record fall in the availability of both permanent and temporary staff that was steeper than the UK-wide average. Similar to national trends, the South of England’s sharp reduction in permanent staff was attributed to candidates’ hesitancy to switch roles amid pandemic uncertainty, fewer EU workers, skills shortages, and the furlough scheme. Recruiters commented that Brexit, IR35 legislation, and furlough were also contributing factors to the shrinking pool of temporary candidates.

Starting salaries for permanent staff in the South of England increased for the third consecutive month, at a slightly faster pace than the rest of England. Temporary wage inflation increased at the sharpest rate in two years, with businesses hoping to attract scarce short-term workers.

Courtesy of IHS Markit, KPMG, and the Recruitment & Employment Confederation

Final Thoughts

With more than 60 million vaccine doses administered in the UK and the nation passing each step in the roadmap out of lockdown, it is clear that the economy is turning the corner as jobs rebound and businesses rebuild. The REC’s latest Jobs Recovery Tracker noted 181,000 new job postings in the first week of May alone, adding to a total of 1.53 million active job postings across the country.

However, the shrinking pool of skilled candidates across all English regions must be addressed in order for the nation to make a full economic recovery. The Department for Education recently found that one in four hard-to-fill vacancies were attributable to skills shortages, and that nearly 60% of these shortages occurred in middle and high-skilled occupations.

The recruitment industry has the potential to play a key role in supporting businesses to address and fill these skills gaps. According to the REC, recruiters are vital in facilitating social mobility and help over 300,000 unemployed people find permanent roles each year. If the government can improve access to opportunities and provide funding for work-related training, then recruiters can ensure that skilled workers are quickly and accurately placed in sectors experiencing worker shortages.

Jo Thompson Recruitment is prepared to rise to the challenge of placing top-tier candidates in difficult-to-fill vacancies. Even when the best candidates are in short supply, our extensive network and premier testing ensures that we will find the ideal candidate for your organisation. Email us at [email protected] or give us a ring at 0844 2920800 for further details.