There could be problems ahead in the North East jobs market after a major new report out today found that permanent and temporary vacancies were both falling.

The latest KPMG and REC, UK Report on Jobs: North of England survey signalled a sustained and marked drop in permanent staff appointments, but also a renewed fall in billings for short-term staff across the region during February.

Recruitment agencies in the North of England registered a drop in temp billings for the first time in four months in February. According to anecdotal evidence, demand for temporary workers had deteriorated. Overall, the reduction was the joint-quickest seen since June 2020.

Of the four monitored English regions, only London recorded a faster decline in temp billings, while the Midlands bucked the wider UK trend and recorded a modest increase.

The number of permanent vacancies across the North of England fell in February, thereby breaking a three-year sequence of expansion, although the rate of decline was only marginal.

At the same time, recruiters in the North of England signalled a decrease in the number of job openings for temporary workers. Though only slight, the reduction was the first recorded since October 2020.

Ian Beaumont, Newcastle Office Senior Partner for KPMG in the UK said: “Economic uncertainty and subdued demand is still impacting hiring conditions across the North of England, with permanent vacancies falling again. The increase in temp billings we saw in previous months was indicative of businesses wanting to be flexible on cost base, however demand for workers in February meant that we saw a fall for the first time in four months suggesting businesses are waiting to fulfil their hiring plans.

"We are seeing workers looking for permanent positions as it offers them greater security, but there aren’t enough vacancies available as businesses want greater certainty to be able to confidently pick up hiring activity. For hiring activity to pick up consistently again, we’ll need to see a strengthened market and economic stability.”

Although both starting salaries and temp wages rose across the North of England amid competition for highly skilled candidates, rates of pay growth remained among the softest seen over the past three years.

Recruiters operating in the North of England reported another decline in permanent staff appointments in February, thereby stretching the current sequence of reduction to eight months. Survey respondents blamed the latest fall on subdued demand conditions and economic uncertainty.

That said, the downturn recorded in the North of England was less pronounced than that seen at the UK level.

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Permanent staff supply increases at quickest rate for six months Latest data pointed to a rise in the availability of permanent staff for the second month running in the North of England. The respective seasonally adjusted index posted a steep increase overall that was the quickest in six months. Recruiters mentioned that candidates sought out the security of a permanent position amid challenging market conditions. The North of England recorded the sharpest rise in permanent staff availability of all monitored English regions.

February survey data indicated another uplift in starting salaries across the North of England, thereby extending the current sequence of inflation to three years. Higher salaries often reflected attempts to attract suitably skilled staff, according to anecdotal evidence. The rate of inflation improved to a four-month high and was sharp but remained just below the historic average.On a regional basis, the North of England recorded the quickest rise in starting salaries of all four monitored English areas.

Neil Carberry, REC Chief Executive, said: “As inflation is falling back to target earlier than expected, it’s time to get the focus on growth. This month’s survey shows the market slowing, and recruitment agencies registering a drop in temp billings for the first time in four months in the North. “In saying that, there is a notable demand for people to fill accounting, finance and blue-collar roles in the North.

“Given recent news about GDP dropping, this overall picture is no surprise – but it is certainly still quite resilient by comparison with previous recessions. We know the economy has the potential to create jobs and opportunities – but it can only do that sustainably if we can get economic growth going.

“Following the Budget last week, which didn’t address some of the key drivers of growth like skills, infrastructure and reducing the cost of investment and employment, all eyes are on the Bank now. Lower interest rates will help build firm’s confidence to invest.

"The temporary labour market is the unsung hero of the economic uncertainty of recent years. It keeps the cogs of the economy turning amidst uncertainty and labour shortages – but it still needs nurturing. As we approach the General Election, businesses will be looking to politicians for commitment on this, and reforms of regulation that will support it from IR35, to regulating of the umbrella market and delivering flexibility to the Apprenticeship Levy.”

The KPMG and REC, UK Report on Jobs: North of England is compiled by S&P Global from responses to questionnaires sent to around 150 recruitment and employment consultancies in the North of England.