Scottish hiring activity under cosh amid cloudy economic backdrop, RBS finds

June data signalled a further fall in permanent staff appointments north of the Border, thereby extending the current sequence of contraction to five months, with the rate of decrease quickening from May and solid overall, the NatWest-owned lender’s latest Report on Jobs survey has found.

It said anecdotal evidence suggested subdued business confidence and candidate hesitancy to seek new roles due to the weaker economic climate stifled recruitment, although the rate at which permanent placements decreased in Scotland was weaker than that seen across the UK as a whole.

Turning to Scottish temp billings, these fell for the ninth successive month in June, going against the broader UK trend. The pace of reduction was sharp overall, despite moderating to the softest in three months, and panellists reported that candidate scarcity, reduced amounts of new work, and hiring delays were key in driving the latest reduction in billings, RBS found.

Demand for permanent staff increased across Scotland in June, with particularly sharp rises in relevant vacancies in IT and computing, which was also the top category in temporary staff demand rankings, with the latter kind of vacancy rising last month, following a five-month period of contraction.

Regarding candidate availability, recruitment consultancies across Scotland signalled a strong decrease in the pool of job-seekers for permanent jobs during June, and the pace of decline was the strongest in three months on the back of skill shortages and “lingering” market uncertainty. Short-term staff availability also fell last month, with contractions noted in each month since March 2021, and recruitment agencies said many candidates were favouring permanent jobs over short-term contracts given the uncertain economic outlook.

The report also examined starting salaries, with those for permanent posts increasing again north of the Border at the end of the second quarter. The rate of growth quickened from May’s 27-month low and was “historically sharp” overall, with panellists reporting that shortages of skilled candidates and competition for labour drove up pay, said RBS, which recently found that the Scottish private sector enjoyed faster growth in activity in June.

Pay packets

Scottish recruitment agencies also signalled a rise in temp pay rates in June, stretching the current run of inflation to 31 months, but the pace of increase softened for the second month in a row to the weakest recorded in the aforementioned sequence.

The bank’s report follows the Office for National Statistics revealing that UK average regular pay, excluding bonuses, was 7.3 per cent higher year on year in the three months to May, and analysts believe the Bank of England could in August increase interest rates to 5.5 per cent

RBS chief economist Sebastian Burnside said: “Permanent staff appointments fell solidly, while the downturn in temp billings eased but remained historically marked, with panel members linking weakness to the subdued economic climate and hesitancy to commit to new hires.

"Despite vacancies increasing, and notably a fresh rise in temp vacancies, this caution around the outlook combined with candidate shortages meant that recruiters struggled to fill roles. A tight labour market also meant that firms raised their starting salaries and wages further in order to attract suitable candidates.”