UK companies are increasingly turning to temporary workers instead of permanent staff due to low economic confidence and rising cost pressures, according to a new report from KPMG and the Recruitment and Employment Confederation (REC).
Sharp decline in permanent hiring
Recruiters reported a strong increase in temporary roles in May, while permanent staff recruitment saw its fastest decline in ten months. Political turbulence in the UK and the ongoing Middle East conflict have discouraged businesses from expanding their permanent workforce, highlighting the fragility of the UK jobs market.
Neil Carberry, chief executive of REC, said: “With businesses tapping the brakes on permanent hiring in the face of higher costs, the Gulf crisis and new employment red tape, temporary work is making up the gap.”
Rising candidate numbers and modest salary growth
Redundancies, fewer job opportunities, and job security concerns have increased the number of candidates applying for roles, according to the 400 UK recruitment firms surveyed in mid-May. The combination of higher candidate volumes, lower demand, and tighter budgets meant that salaries for entry-level and temporary workers rose only modestly in May compared to the previous month.
The nursing, medical, and care sector was the only area to see higher demand for permanent staff. The steepest decline in permanent positions occurred in the retail sector.
Official figures show rising unemployment
Official data revealed that the unemployment rate unexpectedly rose to 5% in the three months to March, while wage growth slowed. This follows a government-backed report warning that the number of young people not in work or education has surpassed one million for the first time in over a decade.
Business leaders, including Simon Wolfson, CEO of retailer Next, have cautioned that a “dramatic fall” in entry-level jobs is driving up youth unemployment.
Jon Holt of KPMG commented: “Ongoing global and domestic uncertainty is making businesses more cautious, and that is increasingly reflected in hiring decisions. While some employers are turning to temporary contracts to retain flexibility, many permanent hiring plans are being delayed or put on hold.”
