Insights

The sluggish growth of the British economy is becoming evident. London has been hit harder than the rest of the country, with a significant decrease in industry vacancies compared to last year.
The slowdown we experienced in the first half of 2023 was expected after a boom in recruitment in 2022. Vacancies across industries have dropped by 24% in Q2 2023 compared to Q1, potentially reaching levels not seen in over a decade.”

“The professional recruitment market seems to be in a slump. Month-on-month and year-on-year data shows decreases in all but two metrics. However, a deeper look at the data reveals some encouraging signs of growth.

The trends in the latter half of July, coupled with recent positive economic news, suggest that more profitable months lie ahead. While nationwide skills shortages and ongoing union-led pay disputes remain a concern, if inflation continues to fall and the economy keeps growing, consumer and business confidence should improve, which will benefit the recruitment sector.

The government also has a role to play in ensuring the UK has a plentiful supply of skilled workers to fill vacancies. A continued focus on training and better visa routes for overseas talent is critical to success."

Although there has been a slight pickup in vacancies during May 2023, we have seen a sharp fall in vacancy numbers since the beginning of the year, particularly between March and April. This downward trend is largely influenced by the prevailing economic uncertainty that has adversely affected consumer spending in the UK throughout 2023. However, we expect demand to begin to increase again now that signs of a recession are behind us for this year at least.

“We expected to see an increase in recruitment in May, but the statistics show that hiring is still slowing down. This could be due to the unusually high number of bank holidays last month. It will be interesting to see how the recruitment market performs in June, especially given the positive news about the UK's economy.

We do not expect to see a significant decrease in the competition for top talent. The labor market is still tight, and recruiters will need to help balance the needs of employers who are looking for high performers on tight budgets with the demands of candidates who are increasingly aware of their power in the market."

The recruitment market is often seen as a bellwether for the wider economy, so the sharp fall in jobs and placements is something that all business leaders and government officials should take note of.

The data suggests that we have moved from a situation where there was a shortage of candidates to one where there is a sharp drop in demand. This is likely due to a number of factors, including the rising cost of living, the ongoing war in Ukraine, and the UK's exit from the European Union.

While the Office for Budget Responsibility (OBR) has said that we have so far narrowly avoided a recession, we could be heading in that direction unless confidence in the economy is restored. And this needs to be underpinned by a strong labor market.

If the economy does enter a recession, it is likely that the recruitment market will suffer even more. This could lead to job losses, increased unemployment, and a slowdown in economic growth.

Some additional details about the decline in the UK recruitment market:

• The number of jobs advertised in the UK fell by 15% in the first quarter of 2023.
• The number of people placed in new jobs fell by 12% in the same period.
• The number of vacancies in the UK is now at its lowest level since the start of the pandemic.
• The unemployment rate in the UK is rising, and is now at its highest level in two years.”

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“The recruitment market is recovering from the initial slowdown at the beginning of the year. The OBR's prediction that the UK will avoid a recession this year has influenced the increases in March and April. The Chancellor's Budget has also played a role, but APSCo believes that more could have been included, such as a review of the Apprenticeship Levy funds and more viable visa routes for highly skilled international contractors.

While there is an annual decline in a number of metrics, this is less surprising when we consider that this time last year we were seeing record breaking vacancies in job moves. It is interesting to note the trends in the contract recruitment market, which are showing signs of difficulty. This may be an indication that the skills shortages are having a negative impact on the flexible labour market.”