UK firms grapple with persistent recruitment challenges as post-pandemic "jobs boom" subsides

Despite the post-pandemic "jobs boom," a survey by the British Chambers of Commerce (BCC) reveals that 73% of UK firms are still struggling with recruitment -- only a 9% decrease from the record high of 82% seen in the final quarter of 2022.

The BCC survey, which polled nearly 5,000 companies, indicates that the hospitality sector continues to be the hardest hit by recruitment challenges, with 79% of businesses in this industry reporting difficulties. Following closely behind, the construction and manufacturing sectors both face hurdles in hiring, with 78% encountering recruitment issues.

However, there are emerging signs that the tight labour market is beginning to loosen, as separate research from the advisory group BDO indicates that hiring intentions have continued to decline in September.

BDO’s monthly employment index recorded its weakest reading in nine years, reflecting businesses’ struggles to maintain staffing levels amidst factors such as higher borrowing costs, elevated wage growth, and weaker customer demand. Additionally, BDO notes a decline in business confidence and output, attributing it to the challenges posed by "ongoing inflationary headwinds."

Recent official unemployment figures revealed a 0.5 percentage point increase in the jobless rate, reaching 4.3%. Many companies appear to be scaling back their hiring plans in response to repeated interest rate hikes by the Bank of England and growing concerns about the risk of recession.

This week, three major London-listed recruitment firms, Robert Walters, Pagegroup, and Hays, are scheduled to provide updates on their trading performance for the past quarter. City analysts anticipate that all three companies will report a decrease in pre-tax profits by the end of their financial years.

These firms have observed signs of weakness in the hiring markets of the UK, US, and China in recent months, with a shift towards temporary rather than permanent staffing.

On Tuesday, Robert Walters is set to report its trading performance for the past three months. Analysts at AJ Bell expect annual profits to decline by nearly half to £29 million, despite a 6% increase in sales to just over £1 billion. Pagegroup, expected to post a 30% decrease in annual profits to £136 million, will report on third-quarter trading on Wednesday.

Dirk Hahn, who recently assumed the role of CEO at Hays, will deliver his first shareholder update on Thursday, presenting figures for the first quarter of the financial year. Annual profits for Hays are forecasted to fall by 15% to £166 million. Reed, one of the UK’s largest privately-owned recruitment agencies, has reported a 20% decline in the number of advertised jobs over the past three months compared to the previous year, while job applications have risen by 20%.

James Reed, the company’s chairperson, expressed that previously robust sectors such as construction, property, IT, and telecoms have experienced a slowdown. Reed emphasised, "The market is fairly tough at the moment – there are more people applying than there are jobs out there. We are still to see the full effect of interest rate rises … certain sectors are slowing down."

However, Reed noted that there remains a demand for IT professionals and individuals with AI-related skills. He added, "We are still trading reasonably well but it won’t be as strong as last year. There was a jobs boom coming out of the pandemic, starting in August 2020."

In response to evolving workforce needs, Reed is in the process of launching "energy academies" designed to teach green skills, including solar panel installation and home insulation. Reed believes there is a growing need to introduce more skills into the UK workforce to to introduce more skills into the UK workforce to meet net-zero targets.