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UK firms scaling back growth plans amid hiring crunch

·Finance Reporter, Yahoo Finance UK
·2-min read
UK firms  Workers travel through London Bridge rail and underground station during the morning rush hour in London, Britain, September 8, 2021. REUTERS/Toby Melville
UK firms added staff in May at the slowest pace since early 2021. Photo: Toby Melville/Reuters

UK firms are being forced to rethink their growth plans as they struggle to hire staff, according to a survey.

Job vacancies and placements both slowed in May, suggesting that employers are starting to "rethink their growth plans because of skills shortages which are proving difficult to fix as quickly as they need".

The Recruitment and Employment Confederation (REC) and KPMG said a number of recruiters blamed candidate shortages for hampering their ability to fill vacancies.

The permanent jobs index fell to 59.2 from a peak of 71.5 last September, where a figure above 50 indicates growth.

Read more: Bank of England: Top UK banks no longer too big to fail

A shrinking pool of candidates and strong vacancy growth meant that rates of starting pay continued to rise at a near record pace, particularly for those taking up permanent posts, said the report.

Strong upward wage pressures will concern the Bank of England (BoE), which has warned pay rises that are not accompanied by productivity gains may embed high inflation over the long run.

REC chief executive Neil Carberry said: “These numbers show a hugely positive jobs market if you are looking for work.

“While the pace of growth has dropped after a stellar first quarter, by any normal measure there are still lots of vacancies out there, offering improved wages.

“Compared to pre-pandemic, labour supply is still the big issue we have to solve.”

Temporary staff hiring in May also fell to its lowest since early last year.

Read more: UK braced for more economic gloom amid rising inflation and falling investment

Employers seeking IT and computing staff posted the strongest increase in demand for permanent staff in May, the REC said, followed by employers in the hotel and catering industry.

Claire Warnes, of KPMG UK, said: “For over a year now, we have seen a sustained mismatch in the growing numbers of vacancies in every sector of the economy against the inadequate supply of skilled candidates.”

The BoE is widely expected to increase interest rates for the fifth time since December on June 16 to tackle long term inflation.

Watch: How does inflation affect interest rates?

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