Worsening skills shortages in the UK are putting the brakes on employment growth.

According to the Recruitment and Employment Confederation/KPMG monthly report on jobs, permanent staff appointments continued to rise in August but at their slowest rate for over two years. Temporary and contract staff appointments also hit a 27-month low.

The survey found that the availability of candidates for permanent roles fell further in August, with the rate of decline accelerating to the sharpest for a year. Temporary and contract staff availability was also down, with the latest drop the most marked in ten months.

Starting salaries for people placed in permanent roles increased helped by growing demand.

Midlands-based consultancies reported the strongest growth of permanent placements while those in London recorded the weakest increase. The Midlands also saw the fastest growth of short-term appointments, while the slowest expansion was signalled in the north.

Nursing, medical and care were the most sought after roles for permanent staff in August with the slowest rate of expansion for hotel and catering workers. Nursing, medical and care also posted the fastest increase in demand for temporary and contract workers with executive and professional being the slowest-growing category.

“The UK jobs market is entering a new phase. Because of the scarcity of talent available, we expect that employment will continue to grow but at a slower speed than we have seen over the past two years. Likewise, unemployment is likely to slow its rate of descent as we move closer to full employment,” said REC chief executive Kevin Green.

“In response to worsening skills shortages, employers are focussing on retaining the staff they have and this will promote wage growth. Better investment in training and motivating the current workforce should also help to improve productivity.

“Clearly, major problems remain. Across the private sector and in vital public sector roles such as teaching and healthcare, talent shortages are reaching crisis point. We need a more active focus on skills and progression from the government as well as a balanced approach to immigration to get to grips with these entrenched workforce issues.”

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Bernard Brown, partner at KPMG, said: “There was no respite for recruiters in August, who were left struggling to fill vacancies after a vast swathe of Britain’s job seekers appeared to take the summer off. The number of people looking for a job fell at the sharpest rate seen for a year, leaving unfilled posts across the economy. 

“Many candidates may have simply shelved their plans for the summer, believing their prospects to be stronger in September. However this is of little comfort to those businesses needing staff now to meet demand for their goods and services.

“This frustrating dynamic continues to have an inflationary effect on pay, which rose yet again in August. With candidates having their pick of the job market, companies need to offer more than just cash. In order to attract and retain the best people businesses need to offer a bespoke package of benefits, including flexible working, which can be tailored to suit the individual and their priorities and commitments.”

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