Decline in permanent posts but starting salary inflation climbs to three month high, according to latest Scottish Labour Market Report

Sebastian Burnside (Chief Economist at Royal Bank of Scotland)

ACCORDING to the latest Royal Bank of Scotland Report on Jobs survey, both permanent staff appointments and temp billings contracted sharply in September. Panellists linked reduced hiring activity to fewer vacancies, weaker confidence around the outlook, and shortages of suitably-skilled candidates that made it harder to fill any outstanding roles. Notably, demand for staff weakened again, while the supply of both permanent and temp candidates deteriorated in September, with some workers hesitant to move roles given lingering uncertainty around the economic outlook. As a result, competition for skilled and scarce labour led to further increases in starting pay. Trends diverged, however, as permanent salaries grew at the sharpest pace since June, while temp wage inflation slipped to a three-month low and was modest overall.

Sharp fall in permanent new hires

Scottish recruiters recorded a second successive monthly fall in permanent placements during September. The rate of contraction quickened from August and was sharp overall. According to panellists, the downturn was linked to fewer vacancies as well as some reports of difficulties in sourcing and securing candidates.

Permanent staff appointments across Scotland fell at a slightly quicker rate than that seen on average across the UK.

September data signalled a sharp drop in temp billings across Scotland, thereby extending the current run of decrease to a year. While the pace of reduction eased from August, it contrasted with a fresh expansion at the UK level. Recruiters attributed the drop to weaker demand conditions and candidate shortages in certain sectors.

Downturn in permanent staff supply remains marked

The availability of candidates to fill permanent job roles in Scotland decreased during September, thereby stretching the current period of decline that began in February 2021. Despite easing to a three-month low, the rate of contraction remained sharp and was broadly in line with the survey average. Recruitment consultancies noted that generally tight labour market conditions and skills shortages had weighed on candidate numbers. 

Meanwhile, permanent labour supply expanded across the UK as a whole in September.

Recruiters based in Scotland signalled a further fall in temp staff supply during September, continuing a trend which has been apparent for just over two-and-a-half years. Moreover, the rate of contraction was the quickest in three months and was strong in the context of historical data. Recruitment agencies often highlighted an increased reluctance among workers to move roles amid concerns over job security.

At the UK level, the availability of temporary candidates continued to rise during September.

Marked rise in salaries for permanent workers

September data pointed to a rise in salaries awarded to permanent new joiners across Scotland. Moreover, the upturn was the fastest since June and marked overall. According to anecdotal evidence, stronger competition for skilled labour pushed up starting pay.

Permanent starters’ pay also rose at the UK level, though the rate of increase remained softer than that seen for Scotland.

Temp wages rose modestly across Scotland during September. Some clients were willing to increase hourly pay rates to secure candidates, according to recruiters. That said, the rate of growth moderated notably from August, and was much softer than compared to this time last year. Some panel members indicated that increases in pay had moderated amid signs of inflationary pressures subsiding.

Nevertheless, the rate of temp wage inflation seen for Scotland was broadly in line with the UK trend.

Quicker fall in permanent vacancies

After falling for the first time in over two-and-a-half years in August, demand for permanent staff deteriorated further across Scotland in September. Moreover, the rate of decrease was the most pronounced since December 2020 and outpaced the UK-wide average.

Of the eight monitored sectors, Executive & Professional registered the sharpest drop in vacancies, followed by Secretarial & Clerical.

After broadly stagnating in the previous survey period, temp vacancies fell across Scotland in September. The pace of contraction was modest overall but contrasted with a sustained rise at the UK level. 

Secretarial & Clerical recorded the strongest drop in temp vacancies, followed closely by Accounts & Financial.

Sebastian Burnside, Chief Economist at Royal Bank of Scotland, commented:

“Recruitment activity across the Scottish labour market deteriorated as the third quarter drew to a close. Both permanent staff appointments and temp billings fell at sharp rates, with panellists linking the reductions to candidate shortages and falling demand for labour amid concerns over the wider economic climate.

“Uncertainty around the outlook also meant that workers were more hesitant to risk a job move, leading to further falls in staff availability. Moreover, ongoing candidate shortages and the increasing cost of living prompted employers to raise their pay offer to attract and secure workers.”

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