UK labor shortages have been highly publicized this year, and it looks as though Brexit has been a key contributor to this, with a new report led by academics from Oxford university finding that industries most reliant on freedom of movement have been hit significantly. Brexit is certainly not entirely to blame though. The early retirement of workers over the age of 50 has also caused significant problems across the UK labor market coupled with Covid-19 recovery. In response to these ongoing shortages, APSCo’s latest data strongly indicates that employers are increasingly relying on the contingent workforce to combat labor shortages.
Permanent Job Numbers Take a Hit
Taking a detailed look into the white-collar jobs market, our latest Recruitment Trends Snapshot report reveals that the contractor recruitment market remains buoyant in light of the ongoing dearth of resources, with vacancies up 2% month on month and 7% between July 2021 and 2022. This increase in contractor demand has translated into positive sales revenue trends for contract placements, which grew 3% between June and July 2022 and 15% annually.
In contrast, permanent job numbers have dropped, down 1% from June to July 2022, also reporting a similar decline annually in July. This decline in permanent demand has impacted both placement numbers and sales revenue for recruiters, which both saw a 7% drop month on month in July.
While this dip in permanent recruitment appears to be marginal, in a market impacted by a cost-of-living crisis, recession fears and a shortage of skills, these figures present a potential indication of economic instability. In fact, when we look at the pre-pandemic comparison, we can see the extent of the drop in permanent recruitment, with vacancies falling 23% between July 2019 and July 2022. In comparison, contractor job numbers rose 13% during this same period, highlighting the extent of the reliance on contingent labor to fill resourcing gaps in the current economy.
Salaries Show No Signs of Inflation Increases
The data, provided by the global leader in software for the staffing industry, Bullhorn, also reveals that perhaps rather concerningly, given the widely talked about cost-of-living crisis, average permanent salaries have fallen 7% year on year, despite July seeing a 10% annual increase in permanent placement numbers. This will no doubt exacerbate the shortage of applications for current roles, further increasing the reliance on the contract market. However, a further worry is that these underwhelming salaries could also lead to a drop in staff retention rates. There have already been reports of sector-wide strikes, with recent plans for an autumn strike by those in the education sector fueled by anger over the government’s below-inflation pay proposal.
An Unsustainable Talent Pipeline
While the reliance on the contractor market to fill resourcing gaps is evident, as Global Public Policy Director Tania Bowers explains, this isn’t a long-term solution: “This reliance on the non-employed segment of the workforce simply isn’t sustainable at a time when the UK’s attractiveness as a destination to work for international contractors is dwindling post-Brexit. And with the impact of Off Payroll still being felt in the temporary recruitment market, the longer-term availability of these resources and the ability to tap into skills in a cost-effective manner is at risk. We urgently need some stability from the government and a clearer direction on the regulation of the employment market to ensure that the UK can manage through the difficult times ahead.”
The data is painting a worrying picture for the UK’s permanent recruitment market at a time of continued instability. We are still seeing the impact of the pandemic play out, but to see such significant spikes in contractor recruitment when comparing pre-pandemic levels with today, while permanent jobs decline, suggests that the country’s skills agenda is balancing on a knife’s edge. Companies are faced with no other choice but to turn to contractors to keep business as usual operations running, but for many, that’s not a sustainable approach. With average permanent salaries also dropping despite the cost-of-living crisis, our economic stability is at stake. While we await the decision around a new prime minister for the country, my hope is that the successful individual prioritizes a solution to the UK’s skills crisis.