The first quarter of 2023 has certainly kept the recruitment market on its toes. With strike action continuing across the public sector, the chancellor’s first official budget and a “will we, won’t we” question around the UK entering a recession (which at the time of writing stood in the latter category), it’s been a bit of a roller coaster ride. But the staffing sector continues to show its resilience to the constant economic challenges.

The biggest concern for us all at the moment, though, is the skills shortages that are stubbornly hanging around despite the fall in vacancies we’re seeing. Reports across the recruitment market are showing signs of a hiring contraction. In fact, our own Recruitment Trends Snapshot — produced in conjunction with Bullhorn — indicates that permanent and contract jobs fell in February, down 19% and 14% respectively month on month.

Annual comparisons paint a similar picture of a decline in hiring, with permanent vacancies dropping 26% year on year in February, while contract levels also fell 20%. However, this doesn’t mean that the battle for talent is slowing. As Jeremy Hunt highlighted throughout his budget announcement, employers are still struggling to recruit, particularly those across highly-skilled professions in science, technology, engineering and mathematics. With unemployment levels remaining low while more than one million vacancies remain open, there are fewer people ready and able to fill many of the jobs that businesses are advertising.

It was certainly promising to see the chancellor commit to growing the UK’s skills in recognition of the tight labor market. The focus on breaking down barriers both for parents who are struggling to return to work amid rising costs of childcare and for those with a disability or on long-term sickness will eventually boost the number of people in employment and reduce the economic inactivity rate.

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We also welcomed the announcement of 12 investment zones — news which was a win for APSCo’s own Public Policy team who had been lobbying for this action ahead of the budget. While it may only impact a small segment of the workforce, the changes to the pensions cap will also improve retention rates for those in healthcare who would likely be lost due to early retirement.

Support for “returnships” and the expansion of skills boot camps will provide a further boost to the professional recruitment market once those involved in these schemes finish their training.

But is this enough?

On a longer-term basis, these steps will build a stronger skills environment across the country, but it is the immediate requirements that are more pressing and arguably haven’t been addressed in the budget. The highly skilled professionals that are needed take time to train and with the childcare support set to take two years to implement, the country will continue to face skills shortages for the next few years. Unless this is addressed, the economic growth of the UK will be at risk.

I’d argue that the long-term skills strategy needs to be underpinned by immediate actions that utilize the flexible labor market on a global basis — a change that APSCo has long called for. For example, where resources cannot be found in the domestic market, the country’s employers need an attractive route of employment for global talent. The current Tier 5 and fast track visa schemes are too narrow in focus and funding needs to be increased for the Home Office to both support existing systems and drive new visa routes which are more viable for highly skilled, self-employed project workers.

We are likely to continue to face a climate the likes of which many of us haven’t had to navigate before for the foreseeable future. However, the skills agenda is a top priority for the government and businesses across the country which is, in fact, promising news for the recruitment sector. It will be interesting to see how the employment landscape adapts over the course of the next quarter.

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