UK businesses turn to temp staff amid recession worries

Small businesses are in a David and Goliath battle for talent. Research has found that almost half of SME workers are looking for a new role, compared with 39% of those at large businesses.

UK businesses are turning to part-time staff to avoid locking into long-term contracts for fear of being dragged down by the economic slump, a new survey out today shows.

Demand for temporary staff is running much higher than for full-time workers, according to consultancy KPMG and the Recruitment and Employment Confederation (REC).

The pair’s permanent placing index – which measures how quickly firms are taking on full-time staff – slid at its quickest pace since the beginning of 2021, when the country was in the teeth of lockdown curbs, down to 44.2 points last month from 49.3 points in March.

That drop pushed the index far below the 50 point threshold that separates growth and contraction.

The temporary index meanwhile climbed to 53.3 points from 52.5 points over the same period, KPMG and the REC said.

Concerns over the health of the UK economy are steering companies toward taking on temp staff who can often be let go quickly to cut costs in response to an economic slowdown.

Although Britain’s economy has outperformed experts’ forecasts at the turn of the year, it is still stuttering. GDP figures out on Friday are tipped to show output only nudged up 0.1 per cent in the first three months of this year.

Neil Carberry, chief executive of the REC, said: “This data shows how uncertain many employers are feeling right now.”

“The good news is they still need to hire, as growing vacancies show. But firms are hedging their bets. After a better month in March, in April we saw permanent hiring fall back quickly and businesses turn to temps to help them through,” he added.

Carberry also said London’s jobs market is grinding to a halt, with the capital’s permanent placing index among the lowest in the UK.

Today’s survey could be a sign of the UK labour market beginning to cool after running extremely hot for over a year.

An exodus of workers, mainly older Brits taking early retirement, compounded by a scarcity of skills has hamstrung firms’ expansion plans.

KPMG and the REC’s temp and permanent staff availability indexes both topped the 50 point growth threshold, signalling labour supply is expanding.

Worker shortages are putting upward pressure on wages driven by businesses trying to outbid rivals to secure talent. The permanent starting salary index jumped to 61.4 points, while the temp pay index hit 57.9 points, meaning pay is rising rapidly.

That adds to the growing body of evidence that may convince the Bank of England to hike interest rates for the twelfth time in a row – probably by 25 basis points to 4.5 per cent on – this Thursday.

Permanent and temp vacancies are still extremely high, meaning demand for workers is strong despite the Bank’s best efforts to chill the UK economy.