Permanent and temporary placements have fallen once again across the capital as businesses brace themselves for an April rise in employers’ National Insurance contributions announced in October’s Budget.
That’s according to new data published today by KPMG and the Recruitment and Employment Confederation (REC), supported by BusinessLDN.
The London labour market pulse check, compiled by S&P Global and incorporating responses from recruitment consultancies across the capital, shows a reading of 42.9 for permanent placements in London in January – any reading above 50 indicates expansion and any reading below contraction.
This marks the six straight negative monthly reading for the capital, with the index falling in November (40.8) to its lowest level since February (39.3) following the Budget. Meanwhile the index for temporary billings in January (38.6) has also hit its lowest point since April 2024 (39.4).
At the same time, permanent staff availability (57.2) and temporary staff availability (60.8) both increased last month as hiring slowed.
As the labour market cooled and staff availability increased, pay growth for new starters in both permanent (52.2) and temporary (51.3) roles was down on last month (56.9 and 53.3 respectively).
Anna Purchas, London Office Senior Partner at KPMG UK, said: “It’s been a challenging start to the year for recruitment in London, with January seeing both permanent and temporary appointments continuing to fall, albeit the former at a softer rate than the rest of the UK. We’re seeing fewer permanent and temporary jobs advertised and the pool of available candidates continuing to grow, although the speed at which the candidate pool for permanent roles is growing eased this month. As businesses’ growth plans for the year ahead crystalise, stimulated by reducing interest rates, this, and cooling pay pressures in the capital, should encourage more firms back to recruitment with more confidence.”
Neil Carberry, Chief Executive at the Recruitment & Employment Confederation, said: “Some employers are hesitant to invest due to economic uncertainty, recent changes to national insurance, and planned employment rights legislation. But recent signs of a more positive outlook in our sentiment surveys give hope that this is not a prolonged press on the brakes. The interest rate adjustment is well-timed to help boost confidence, along with the government’s new year focus on growth. Businesses will be looking for this to flow through to action in the Spring.”
Muniya Barua, Deputy Chief Executive at BusinessLDN, said: “The upcoming hike in national insurance has taken a bite out of the labour market, with many firms thinking twice about hiring. The Spending Review is the opportunity to turbocharge measures to drive the economy forward and restore confidence. That includes greater funding for housebuilding and a multi-year funding deal for Transport for London, as well as quick wins like scrapping the tourist tax and stamp duty on share transactions.”
Separate data for the capital from REC’s Jobs Outlook, encompassing responses from more than 1,000 London-based recruitment consultants last quarter, shows the majority (56%) expect permanent placements to remain stable over the current three-month period, whilst 23% expect to see an increase and just 14% a decrease (7% don’t know).
For temporary agency workers, the outlook for the current three months is similar, with 47% of recruiters expecting hiring to remain the same, whilst just over a quarter (28%) expect an increase and 22% a decrease (3% don’t know).
Across sectors, technology is expected to record the strongest hiring growth when it comes to permanent roles over the current quarter with one in seven (14.7%) expecting to see an increase in permanent placements over the current three-month period. This is followed by engineering & technical (11.9%), health & social care (10.8%) and drivers, including logistics (9.0%).