Permanent placements hit three-month high as labour market stays in good health

Permanent placements at UK businesses increased at quickest pace in three months in February, while demand for staff rose at the fastest pace in six months, a survey released on Tuesday (8 March) found.

According to the latest Markit/REC Report on Jobs, permanent placements growth reached a three-month high in February as data pointed to a further increase in permanent staff placements, as the rate of expansion quickened slightly from the previous month.

Of the 400 UK recruitment firms surveyed, 56.6% reported an increase in the number of permanent employees compared with 56% in January, while the rate of growth for agencies' billings from the employment of temporary staff held steady at 54.4%, marking the 34th consecutive month of growth.

Meanwhile, the level of available job vacancies continued to rise in February, as the rate of growth was the fastest in six months, while demand for permanent staff continued to show a stronger trend than that for temporary workers.

"The UK labour market is at a critical juncture," warned REC chief executive Kevin Green.

"Permanent hiring improved last month, demand for staff remains strong, and pay is going in the right direction – but serious threats are looming just around the corner.

"Next week the chancellor will announce his plans for the coming financial year, at a time when recruiters across the country are reporting serious skills shortages alongside buoyant jobs growth."

However, the availability of staff for both permanent and temporary or contract roles continued to fall in February, although the rate of decline was the slowest on record in the last two years, the report added.

There was mixed news on the salaries front, with starting salaries for successful permanent candidates rising at the fastest pace in three months during February but temporary pay growth easing, hitting a 33-month low.

However, the circumstances surrounding the labour market could soon change as the introduction of the National Living Wage on 1 April and tax changes on 6 April will disrupt hiring strategies for many businesses.

"Employers will seek to offset rising wage bills, for example by scaling back recruitment and increasing automation," Green added. "This could weaken future demand for staff."

"In June, the EU referendum carries a very real risk that business confidence will be curtailed and investment in hiring could falter.

"It's vital that we have an informed debate about the impact the referendum might have on jobs, both in the short and long term. All parties must remember that UK employers need access to the global labour market in order to thrive.