Demand for temporary staff continues to rise

The UK labour market is still experiencing shortages, but anxious firms are increasingly wary of hiring permanent staff as the UK faces a recession.

Data from the Recruitment & Employment Confederation (REC) showed that in the fourth quarter of 2022, employers’ confidence in both the UK economy and their ability to invest in their business remained low.

The team, which interviewed 602 UK employers involved in hiring by telephone between 3 October 2022 and 23 December 2022, found that confidence fell from -67 and -27 in July-September to -68 and -30 in October-December 2022.

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Both sets of figures continue to surpass the previous pandemic-related record lows in June 2020 (-57 on the economic outlook and -13 on investment intentions).

Despite the drop in confidence, the immediate outlook for hiring remains positive for both permanent and temporary workers. Anticipated demand for temporary agency workers continued to rise – improving by 1%, quarter-on-quarter, to +7 over the next three months, and 4% to +8 in the next four to 12 months.

Employers report that hiring intentions for permanent staff were +11 over the next three months, down by 6%, and +15 over the next four to 12 months, down by 3%.

Neil Carberry, Chief Executive of the REC, said the data shows that despite the outlook, hiring intentions show that firms still need new staff, and suggest that a recovery in confidence could be “quite quick if inflation falls”.

“In the face of high levels of uncertainty and labour shortages, it is no surprise that temporary workers are playing a bigger role in companies’ plans.

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“Governments can help realise their potential by freeing up more of employers’ money to train and develop them by reforming the Apprenticeship Levy.

“Businesses across sectors are calling for this reform which will help with the labour and skills shortages that are currently holding back economic growth to the tune of around £39 billion a year according to REC research.”

The monthly index of vacancies, from the REC and KPMG, fell slightly in December to 53.0, down from 54.1 in November. 

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The report found that then number of staff hired for permanent roles fell for the third consecutive month in December 2022, while temporary roles rose, though the rate of growth was still modest.

Demand for temporary staff had the slowest upturn in the executive and professional sector, while the sectors which saw the biggest rises in demand for permanent staff were the nursing/care/ medical sector, followed by hotel and catering.