Growth in Scottish starting salaries accelerates despite weakening recruitment activity 

12/07/2023
Sebastian Burnside (Chief Economist at Royal Bank of Scotland)

ACCORDING to the latest Royal Bank of Scotland Report on Jobs survey, hiring activity fell again across Scotland during June amid reports that economic uncertainty and candidate shortages had dampened recruitment. The downturn in permanent staff appointments quickened on the month, while temp billings dropped at a softer but still sharp rate. Nevertheless, recruiters signalled a further rise in vacancies at the end of the second quarter. Moreover, the upturn in demand for permanent staff was the strongest in six months, corresponding with a sharper rate of growth in starting salaries. Additionally, temp vacancies increased for the first time since December 2022. However, candidate availability continued to deteriorate, with temp staff supply falling at a sharper rate than that seen for permanent workers. 

June data signalled a further fall in permanent staff appointments across Scotland, thereby extending the current sequence of contraction to five months. The rate of decrease quickened from May and was solid overall. Subdued business confidence and candidate hesitancy to seek new roles due to the weaker economic climate hindered recruitment, anecdotal evidence suggested.

That said, the rate at which permanent placements decreased in Scotland was weaker than that seen across the UK as a whole.

Going against the broader UK trend, temp billings across Scotland fell for the ninth successive month in June. The pace of reduction was sharp overall, despite moderating to the softest in three months. Panellists reported that candidate scarcity, reduced amounts of new work and hiring delays were key factors driving the latest reduction in billings.

Recruitment consultancies across Scotland signalled a strong decrease in the number of candidates available for permanent jobs during June. Though much softer than the average recorded over the current 29-month sequence of contraction, the pace of decline was the strongest in three months. Recruiters noted that skill shortages and lingering market uncertainty had impacted candidate numbers. 

Additionally, the trend seen in Scotland compared to the UK as a whole continued to diverge, as candidate availability improved at the UK level and at the quickest pace in two-and-a-half years. 

Short-term staff availability fell across Scotland in June, with contractions noted in each month since March 2021. The decrease, though weaker than that seen in May and much softer than this time last year, remained rapid overall. According to recruitment agencies, given the uncertain economic outlook, candidates were often reluctant to switch roles, with many favouring permanent jobs over short-term contracts. 

While Scotland signalled a decrease in short-term staff availability, the UK on average registered a further expansion in temp candidate numbers during June. 

Permanent starting salaries increased again across Scotland at the end of the second quarter. The rate of growth quickened from May’s 27-month low and was historically sharp overall. According to panellists, shortages of skilled candidates and competition for labour drove up pay.

The rate at which starting salaries increased across Scotland outpaced the UK-wide average.

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

The pace of wage growth eased slightly across the UK as a whole, but remained stronger than that seen for Scotland.

Demand for permanent staff increased across Scotland in June. Moreover, after having slowed for 13 months straight, the rate of expansion accelerated at the end of the quarter and outpaced that seen at the UK level.

Supporting the upturn were sharp rises in permanent vacancies across IT & Computing and Blue Collar sectors.

Following a five-month period of contraction, temp vacancies rose across Scotland during June. The respective seasonally adjusted index signalled a solid rise in demand for temporary workers, albeit one that was slightly softer than that recorded for the UK as a whole.

Of the eight monitored job categories, IT & Computing topped the temporary staff demand rankings, followed by Accounts & Financial.

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

“The latest recruitment survey data for Scotland pointed to further falls in hiring activity across both permanent and temporary jobs markets at the end of the second quarter. 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.”

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