The Recruitment and Employment Confederation (REC) and KPMG Report on Jobs – published today – provides the most comprehensive guide to the UK labour market, drawing on original survey data provided by recruitment consultancies.

Growth of staff appointments eases

Although permanent staff placements continued to rise in December, the rate of growth cooled since November’s seven-month peak. Temporary/contract staff billings also increased at a slower pace, with the latest rise also slower than the previous month.

Stronger rise in demand for staff

Vacancies increased at a sharp and accelerated rate in December. Demand for permanent staff continued to rise at a faster pace than that signalled for short-term workers. 

Decline in candidate availability eases but still sharp

The availability of staff for both permanent and temporary/contract roles fell further in December. Although rates of contraction were slower than in November, they remained marked.

Pay pressures ease

Salaries awarded to staff placed in permanent jobs increased further in December. However, the rate of growth was the slowest in over two years. Temporary/contract staff hourly pay rates increased at the weakest pace in 21 months.

Regional and sector variation

The South posted the fastest growth of permanent staff placements in December, while the slowest rise was seen in London.Growth of short-term appointments was strongest in the Midlands during December, while London-based agencies noted the weakest rise. Demand for staff remained considerably stronger in the private sector than the public sector during December. The fastest overall increase was signalled for private sector permanent workers. In contrast, demand for public sector permanent staff fell further.December data signalled a broad-based rise in demand for permanent staff. The strongest growth was signalled for IT & Computing workers, just ahead of Executive/Professional and Accounting/Financial staff.

Hotel & Catering topped the demand for temporary/contract staff demand rankings during December. Demand rose for each of the other categories with the exception of Construction, where a marginal decline was signalled.Bernard Brown, Partner at KPMG, comments: “Hiring remained slow but steady during December, with businesses and candidates keen to complete negotiations before Christmas. We are beginning to see a shift away from short term, low risk hiring, with demand for permanent staff outpacing that for temporary workers. This indicates businesses’ confidence is steadily solidifying, leading to an increased willingness to make long term investments in their workforce.

“In the wake of several high profile breaches, companies are investing heavily in their cyber security teams and demand for IT specialists surged in December. This hiring boom has caused a skills shortage in the sector, with recruiters struggling to find enough candidates qualified in IT security to satisfy demand. Faced with such stiff levels of competition businesses need to rethink their recruitment strategy. As well as hiring talent to build up their in house defence capability, they need to upskill the staff they have, or risk losing them to a competitor more willing to make an investment in their careers.”

REC chief executive Kevin Green, says:“The UK labour market is in great shape at the start of 2016 but some major challenges lie ahead. Skill shortages are a real threat to continued growth in many industries. With talent at a premium, employers will try to attract staff by increasing starting salaries. On general wage growth, as many businesses align annual pay rises to the rate of inflation, we anticipate that growth will remain at 1.5 to 2.5 percent. Businesses will need to manage the introduction of the National Living Wage, which will also have a major impact on pay levels. We wait with some trepidation to see the effect it will have on demand for staff, particularly in low-pay sectors such as healthcare.The other bump on the road for business is the EU referendum, which is likely to create uncertainty which could lead to a reduction in hiring.”