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Hiring of permanent staff fell in July by the sharpest levels seen since May 2009, according to a new survey.
The survey by IHS Markit shows the most marked decline in placements was in London, while falls were also recorded in the Midlands, South and Scotland. Only the North saw a rise in placements, but it has the weakest rise in over three years. A particularly marked impact was reported by consultancies based in London.
The report says 38% of recruiters placed fewer people in permanent jobs in July, up from 32% in June when recruitment also fell. Recruitment firms said uncertainty after the Brexit vote was the main reason.
On Thursday, the Bank of England forecast the unemployment rate will rise to 5.4% next year and 5.6% in 2018 after months of falling in the lead-up to the referendum. The unemployment rate fell to 4.9% between March and May, its lowest level since 2005.
The IHS Markit report says businesses may be turning to temporary staff to plug gaps and it adds that salaries for both temporary and permanent staff have increased but at a very slow rate. The rate of pay growth for permanent staff hit a 38-month low. Temporary/contract staff pay rose at the slowest rate since February.
Kevin Green, chief executive of the Recruitment and Employment Confederation (REC), which sponsors the survey, said: “The UK jobs market suffered a dramatic freefall in July, with permanent hiring dropping to levels not seen since the recession of 2009. Demand for staff remains strong with vacancies continuing to rise, but the sharp fall in placements suggests that businesses are highly cautious about committing to new hires. Economic turbulence following the vote to leave the EU is undoubtedly the root cause.
“The record-high employment rate and ongoing skill shortages have made it difficult for employers to find suitable candidates for the roles available in the past, and this remains the case. We’re now seeing the added problem of individuals deciding to stay put rather than change jobs in the current environment.
“While there are worrying signs, it’s important we don’t jump to conclusions from one month’s data. The truth is we don’t know what long term consequences the referendum result will have on UK jobs; with the political situation becoming more stable and the Bank of England making sensible decisions, we may well see confidence return to the jobs market more quickly than anticipated.”
Meanwhile, a survey by Totaljobs conducted in July found that almost half of UK businesses said that Brexit wouldn’t affect the number of people they hire. However, almost half of UK jobseekers said they were more concerned about finding a job now than before the EU Referendum. Almost three-quarters of employees said they had not been spoken to by their employer about the impact of Brexit.