KPMG and The Recruitment and Employment Confederation (REC) have today released their joint report on jobs that reveals a sharp fall in demand for labour.

An excess of supply has put downward pressure on salaries - allowing employers some relief in a financially challenging environment.

There is also now an abundance of qualified and talented labour pool to recruit from in many industries.

The KPMG / REC report provides an accurate guide to the UK labour market as it draws on original survey data provided by recruitment consultancies.

The following has been reported:

Placements and billings continued to fall sharply

December data indicated further steep reductions in the number of people placed in jobs by recruitment consultancies, as the economic downturn continued to depress hiring. For both permanent and temporary staff, the latest declines were the sharpest recorded by the survey to date.

Weak demand for staff

Underlying the latest considerable fall in staff appointments was a further marked contraction in job vacancies during December. In both the permanent and temporary sectors, demand for staff fell at series record rates.

Lower vacancies were broad-based across all broad areas of employment with the exception of Nursing/Medical/Care.

Downward pressure on salaries

For the third consecutive month, recruitment consultants reported declines in permanent and temporary staff pay during December. Anecdotal evidence suggested that rapidly rising levels of staff availability had diluted candidates’ bargaining power.

Candidate availability surged

Reflective of recent redundancies and fewer job opportunities, the availability of staff to fill vacancies continued to rise substantially in December.

The latest improvements in permanent and temporary staff availability were the strongest since the inception of the survey in October 1997.

Kevin Green, Chief Executive of the REC, says:

“These figures are deeply worrying and show that the contraction in the labour market is now rapidly accelerating. The decline in both permanent and temporary appointments in December is the sharpest recorded since the survey began in 1997.

“At a time when the Government is proposing job creation measures, the REC will be seeking urgent meetings with the Government about its proposed removal of the VAT concession in April. This change will put an additional £150 million tax on temporary jobs when we should all be working together to create employment opportunities, not taxing them out of existence."

Mike Stevens, Partner and Head of Business Services at KPMG comments:

“These latest figures only serve to confirm the most pessimistic projections for the UK jobs market. They are also a lead indicator for a rapidly declining employment situation which is not yet reflected in the government's current employment statistics. One reason for this is that employment legislation – enacted since the last recession – tends to defer the incidence of job losses pending completion of consultation periods. In addition many listed companies may have been reluctant to make staff redundant soon before the end of the year, since the redundancy cost would have been much higher than the salary savings made over the short period to the year end. There is also a risk that many employers, experiencing this process for the first time, will be even more reluctant to take on new staff, either to replace leavers in key positions or under the Government's recently announced apprenticeship proposals.

“There are however two factors which have not been present in previous recessions and which might moderate the impact on job losses. The first is that we have moved toward a bonus culture where a significant part of total pay is a bonus depending on both performance and the employer's profits. Thus salary cost should fall in time of recession reducing the need to cut staff. The second factor is that the UK has been a magnet for foreign workers for the last 5 years and recession may mean that these people choose to return home, where they can live more cheaply, if work is no longer available.”