London jobs market shows resilience amid economic storm clouds
Despite a challenging economic outlook, London employers are less cautious about their hiring outlook for the summer season than previously. That’s according to data published today (Thursday) from the KPMG and REC London labour-market pulse check, supported by BusinessLDN.
The report, which is based on data from S&P Global drawing on responses from recruitment and employment consultancies, shows that London’s rating in the index for hiring permanent roles jumped from 35.3 in April to 40.4 in May. Despite this resilience in the face of difficult conditions, the rating is lower than the rest of the UK (43.8).
But wider data from REC’s Jobs Outlook paints a brighter picture, with over a quarter (26%) of firms in the capital expecting to increase recruitment of permanent staff during the next three months over summer, up from 23% last quarter. While over half (59%) expect no change in hiring expectations, 8% expect to see a net decrease — a slight increase from 6% last quarter.
The sectors looking to boost their permanent headcount the most over the summer are hospitality (47%, up from 35% in March), followed by life sciences (37%, up from 19%) and retail (37%, up from 28%).
Anna Purchas, Senior London Office Partner at KPMG, said: “The first half of the year has seen a volatile recruitment environment in London, with many employers understandably preferring to hire contract and temporary staff over expensive permanent hires to plug skills gaps, as they waited to see how the economy played out. Data pointing to business confidence slowly returning is good news. The increase in hires in the life sciences sector, as well as the key ‘London’ sectors of retail and hospitality, is particularly exciting for our capital. The indicators point to the economy slowly recovering as we head towards the end of the year, and employers who are thinking about growth will need to focus on investing in skills, retention and recruitment now, in order to seize on the economic upturn when it does arrive.”
Neil Carberry, Chief Executive at REC, said:“While activity is still dropping in London, we are coming off a post-pandemic boom. We have a way to go to overcome labour shortages. Because of that pay growth is likely to remain strong, especially in view of this week’s inflation numbers. We still see shortages of logistics, construction and hospitality workers in London, as well as too few nurses and social workers. Employers should lean on recruiters who can make the difference by helping them find, attract and retain workers in new ways, and tap into different pools of candidates. Skilled professionals are especially in demand right now, so firms have to get their offer right. We can achieve more sustainable growth and stable inflation by addressing shortages now. That starts with action on skills and immigration, but also speeding steps on childcare, transport and back-to-work support, as set out in the REC’s Overcoming Shortages report.”
Muniya Barua, Deputy Chief Executive at BusinessLDN, said: “After a torrid period for the hospitality and retail sectors, it’s good to see signs of renewed confidence with firms recruiting for the crucial summer season. But rising interest rates and stubborn inflation will act as a drag on consumer spending and could yet test the resilience of London’s job market. The Government should back growth-busting measures, such as restoring VAT-free shopping for international shoppers, alongside action to get more Londoners into available jobs, including improving careers advice for all ages, reforming the apprenticeship levy to boost take-up and plugging gaps in its childcare support package.”
When looking at the longer term, the hiring momentum seems set to continue, with 27% of employers expecting to increase hiring over the next four to twelve months. Life sciences (50%), hospitality (45%) and sales and retail (37%) continue to lead the way in hiring expectations.
The growth in London’s recruitment market is also reflected in temporary roles, with 26% of those polled expecting to increase the number over the next three months compared to 8% that expect to reduce these workers. Retail (79%) and hospitality (51%) both expect to see big spikes in temporary recruitment over the summer, indicating firms are hedging their bets on the economic outlook.
Despite the brighter hiring outlook for the summer season, ongoing strike action, stubbornly high inflation and rising interest rates will continue to act as a drag on growth for London’s firms.
BusinessLDN is calling for a series of targeted interventions to boost labour market inclusion to encourage more economically inactive people and those who want to enter the labour market to be able to do so. This includes the creation of a London Careers Service to create a one-stop-shop to allow Londoners at all stages of their careers to receive high-quality, independent advice on careers and training; reforming the apprenticeship levy to boost take-up and ensuring the benefits system incentivises people to work and train.