Bank of England urged to cut interest rates with Northern firms stuck in 'holding pattern'

March survey data saw the number of permanent staff appointments fall at a strong rate, continuing a trend seen in the opening two months of the year.

The placement of staff into permanent roles across the North of England fell for the ninth month running in March. The pace of contraction was strong and largely consistent with the first two months of the quarter. Some recruiters blamed the slump on a downturn in the jobs market, while others mentioned that employers were more hesitant in their hiring decisions.

While the study confirmed there has now been three years of consecutive monthly rises in starting salaries across the North of England, in March it was at its lowest level since that period began.

Neil Carberry, REC Chief Executive, said the figures indicate firms are awaiting a fall in the Bank of England base rate, which has been held at 5.25 per cent since August.

He said: “Economic growth has been sidelined for too long and must be at the heart of this year’s election campaign. Today’s data shows the economy in a holding pattern waiting for inflation and interest rates to ease, so that firms can get to investing. The decline in permanent placements has been steady for some months now, with temporary recruitment still robust, if falling back from the record highs of 2022/23. Employers appear to be leaning on temporary work while they are uncertain about the path of the economy.

“The data here should support a decision by the Bank of England’s Monetary Policy Committee to loosen its grip on growth in the near-term future."

Mr Carberry added: “Pay growth across the UK has slowed significantly across the UK, and is now below the survey’s long-term average for new permanent roles.

"We are seeing the slowest rise in starting salaries in The North for three years, for example. Some sectors – like the bellwether firms in construction – need a clear signal. In other areas, particularly engineering, demand remains high, emphasising the importance of a new approach to skills from governments across the UK, led by reform of the Apprenticeship Levy.

"The uptick in the need for blue collar staff across the UK may be a sign of consumer confidence starting to return – but it also emphasises again how labour shortages may constrain growth when it returns. A proper industrial strategy, with a meaningful and practical workforce element to it, is long overdue.”

Phil Murden, Leeds Office Senior Partner for KPMG in the UK said hiring decisions may also be affected by the recent increase in the National Minimum Wage.

“Candidate availability has risen again as businesses continue to delay hiring decisions,” he said.

"Candidates that are securing roles are seeing increased starting salaries due to tough competition and businesses trying to access the right skills.

"We’d expect to see wage increases continue to play out in April as businesses adapt to the increase in National Minimum Wage, but it may also prolong business hesitancy to hire as they face an increase in their cost base.”