UK Recruitment Market Rebounds as Confidence Grows but Challenges Persist

The UK job market continues to demonstrate resilience amid ongoing economic challenges, with many starting to feel more optimistic about the future. The International Monetary Fund (IMF) projects UK GDP growth to rise from 0.7% in 2024 to 1.5% in 2025, while the Crédit Agricole Economic Research forecasts growth of 0.5% in 2024, accelerating to 1.4% in 2025. This positive trajectory is supported by falling inflation, expected to return to the Bank of England’s 2% target by early 2025, strengthening real incomes, and anticipated easing of financial conditions.
The labour market remains supportive, with low unemployment rates contributing to economic resilience. However, challenges persist, including weak labour productivity and higher than expected inactivity levels due to long-term illness, partially offset by higher migration numbers.
These factors suggest a gradual but steady economic recovery and potential for job creation, although long-term growth prospects remain subdued due to structural challenges that require ambitious reforms to boost the UK’s economic potential.
Current Market Statistics and Trends
As of August 2024, the UK employment rate stands at 74.8% for people aged 16 to 64 years, while the unemployment rate is 4.1% for those aged 16 years and over. The economic inactivity rate for people aged 16 to 64 years is estimated at 21.9%. These figures reflect a slight improvement from the previous quarter, indicating a gradual recovery in the labour market.
The job market has shown signs of cooling, with the number of active job postings at approximately 1.7 million in recent months. In August 2024, there were 748,211 new job postings, marking a 3.2% decline from the previous month. This trend suggests a more cautious approach to hiring among employers.
The number of vacancies in the UK decreased by 42,000 in the quarter to 857,000 in June to August 2024. While this marks the 26th consecutive period of decline, vacancies remain above pre-pandemic levels, indicating a still-robust demand for talent.
Quarterly Market Performance in 2024
Q1 2024 saw a strong start to the year, with the UK economy showing signs of recovery and 0.7% growth in GDP. This positive economic outlook led to increased hiring activity, with 37% of businesses increasing their recruitment efforts. The average time to hire stood at 4.9 weeks, indicating a relatively efficient recruitment process. However, 78% of recruiters still found hiring challenging, suggesting a tight labour market.
Moving into Q2 2024, the recruitment landscape showed a slight cooling compared to Q1. The percentage of businesses increasing their hiring decreased to 31%. The average time to hire remained stable at 4.9 weeks. Notably, hiring challenges eased somewhat, with 67% of recruiters finding it difficult to hire, down from 78% in Q1. The number of job vacancies decreased to 904,000 but remained above pre-pandemic levels.
Early data and projections for Q3 2024 suggest a cautiously optimistic outlook. 77% of recruiters expressed confidence in finding the people they need, up from 74% in Q1. This increased confidence is attributed to optimism around the economy, clarity following the general election, and a loosening labour market. Projections indicate that 27% of businesses plan to increase their hiring in Q3, with 23% planning to increase recruitment spend for specialist roles.
Salary and Pay Trends
Despite a slowdown in permanent placements, companies continue to raise salaries for permanent staff. The annual growth in employees’ average regular earnings (excluding bonuses) was 5.1% from May to July 2024. This trend underscores the competitive nature of talent acquisition and retention in the current market.
In real terms, adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), regular pay growth was 2.2% from May to July 2024. This positive real wage growth suggests that workers’ purchasing power is improving, albeit modestly.
Regional Variations and Sector-Specific Insights
London has shown positive signs with a surge in employers’ intention to hire permanent staff. This uptick in London’s recruitment activity suggests growing confidence in the UK economy, both domestically and internationally.
Regionally, the North of England has demonstrated the strongest performance in permanent staff appointments, while the South of England experienced the sharpest decline. This regional diversity highlights the importance of location-specific recruitment strategies.
Different sectors are experiencing varied levels of growth and demand. The fastest increase in demand for staff was seen in Nursing & Medical Care, followed by Engineering. Conversely, sectors such as IT & Computing and Construction have shown weaker performance.
Challenges Facing the Market
- Skills Gap: The UK is facing a shortfall of 2.5 million highly-skilled workers, costing businesses £6.6 billion per year. This mismatch between available jobs and the workforce’s skillset is a significant challenge for recruiters and employers alike.
- Economic Uncertainty: The ongoing economic fluctuations have led to cautious hiring practices, with some companies extending their hiring timelines or postponing recruitment decisions.
- Changing Work Models: The shift towards remote and hybrid work models has created new challenges in recruitment and talent management, requiring adaptations in hiring strategies and workplace policies.
- Hiring Mistakes: 95% of UK businesses admit to making at least one bad hiring decision every year, with the average cost of hiring an employee in the UK standing at £6,125. A bad hire at the manager level can cost a business up to £132,000, emphasizing the importance of effective recruitment processes.
Opportunities in the Market
- Technological Integration: The adoption of AI and automation in recruitment processes is streamlining workflows and enhancing efficiency. 70% of enterprise-size businesses now use Applicant Tracking System (ATS) software to screen CVs, while 43% of companies are using some form of AI to interview potential hires.
- Focus on Diversity and Inclusion: There’s an increased emphasis on implementing inclusive hiring practices to access a wider talent pool, reflecting broader social transformations in the workplace.
- Upskilling and Reskilling: Investments in training programs are addressing skills gaps and creating a more adaptable workforce. This trend is crucial in light of the current skills shortage in the UK.
- Flexible Hiring Models: Offering a mix of permanent, temporary, and contract positions is becoming more common, catering to diverse workforce preferences and allowing businesses to adapt to changing market conditions.
Market Forecast and Future Outlook
The UK recruitment market is currently valued at £141 billion, reflecting its significant role in the economy. Despite challenges, 67% of UK employers are planning to recruit new staff in 2024, indicating a cautiously optimistic outlook.
The Recruitment & Employment Confederation (REC) emphasizes the need for a clear and effective industrial strategy to tackle labour shortages and create a long-term plan for the labour market. They advocate for expanding access to training, increasing childcare accessibility, and reviewing public sector procurement models to boost workforce productivity and reduce labour market inactivity.
How Australasian Recruitment Company Can Help
As we approach the end of 2024, Australasian Recruitment Company stands ready to help you capitalise on the year’s recruitment trends. Our expertise in London’s evolving job market, particularly in business support, customer service, HR, and sales & marketing, enables us to address your specific hiring challenges. From navigating skills gaps to adapting to new work models, we connect you with top talent to drive your business forward.
Ready to strengthen your team for the coming year? Contact Australasian Recruitment Company today.