Hiring activity in Scotland slows amid steep decline in staff availability and intense wage pressures

The number of people being hired into new full-time roles fell to a 15-month low as the Scottish labour market slowed, according to a new report.

Last month saw the slowest increase in people taking up permanent employment since February 2021, the Royal Bank of Scotland’s (RBS) Report on Jobs said, with the growth in temp billings falling to a four-month low.

It comes amid a steep decline in availability of staff which has pushed up wages, the bank said.

Sebastian Burnside, chief economist the Edinburgh-based bank, said: “While the loss of hiring momentum was inevitable following the sharp rebounds in activity seen after the easing of pandemic-related restrictions, it is hoped that any slowdown will be limited as overall demand for staff remains robust.

“Scotland’s job market saw a further marked increase in recruitment activity during the latest survey period. However, hiring momentum eased for both permanent and temporary staff to the slowest in 15 and four months respectively, as the supply of staff deteriorated rapidly.”

It is the 17th successive month the number of permanent staff appointments in Scotland has increased, with firms telling the bank that increased activity and improved market conditions resulted in more permanent placements.

The rate of growth eased for the second month running to the weakest figure since February 2021.

The increase was slower than the UK-wide figure for the first time in five months.

Recruiters told RBS that there was a marked rise in temp billing in May, which they attributed to higher demand and projects which had been on hold because of the pandemic being resumed; however, there was a record contraction in permanent staff availability.

Businesses told the bank that skill shortages and a competitive labour market were behind the latest slowdown.

The tight jobs market and increased competition for staff has driven up starting pay, with salaries for new starters rising for the 18th consecutive month in May.

But the pace of wage inflation eased to the slowest since October.

Average hourly pay rates for short-term staff rose last month, extending a run since December 2020.

Panellists told the bank some staff had negotiated higher pay due to the increased cost of living, and despite the rate of inflation accelerating slightly since April it was the second softest rise in ten months.