Both permanent staff placements and temp billings fell sharply in January, with the latter posting the first decline in three months. Subdued levels of business activity and ongoing uncertainty around the outlook reportedly discouraged companies from taking on additional staff and made workers more hesitant to seek out new roles.

At the same time, vacancies fell at marked and accelerated rates. In terms of pay, subdued demand conditions contributed to the softest rise in starting salaries for nearly three years. Meanwhile, temp wage inflation quickened, which was linked to the rising cost of living and reports of skills shortages.

Scottish recruitment agencies recorded a second consecutive monthly decline in permanent placements during January. The rate of contraction moderated from December but was sharp overall.

Permanent staff appointments also fell at the UK level and at a stronger rate than observed in Scotland.

A marked deterioration in permanent candidate availability was recorded in Scotland during January, thereby extending the current run of contraction to three years. Moreover, the rate of decrease quickened from the previous survey period to the fastest since December 2022. Anecdotal evidence noted that reduced market confidence deterred candidates from seeking new job opportunities.

While candidate shortages fuelled higher starting salaries in Scotland, the rate of inflation moderated again during January. Furthermore, the rate of pay growth was the weakest in nearly three years and slower than the historical average.

The rate of salary inflation at the UK level also moderated in January, but remained quicker than that seen in Scotland.

Temporary wages increased rapidly across Scotland in January, thereby extending the current sequence of growth that began in December 2020. Moreover, the rate of inflation quickened to a nine-month high. The growing cost of living and competition for skilled staff were said to have driven up temp pay.

Permanent staff demand weakened again across Scotland in January. The pace at which vacancies contracted quickened for the fifth straight month to the strongest since November 2020. Recruiters across the UK as a whole also noted a further drop in permanent vacancies, albeit only marginal.

With the sole exception of nursing/medical/care, all of the eight monitored job sectors recorded a fall in permanent vacancies during January, with executive & professional leading the decline.

Recruitment consultancies across Scotland recorded a sixth successive monthly reduction in temporary vacancies during January. The downturn was the most pronounced since mid-2020. Meanwhile, recruiters across the UK reported a slight rise in demand for temp workers.

Of the eight monitored job categories, the quickest decrease in vacancies was recorded in engineering & construction, followed by executive & professional.

Sebastian Burnside, chief economist at Royal Bank of Scotland, commented: “The health of the Scottish labour market weakened at the start of the year, with recruitment agencies revealing notable declines for both permanent placements and temp billings.

“The subdued economic climate, high costs and uncertainty over the year ahead all contributed to muted hiring activity at businesses.

“Starting salary inflation also moderated again in January, with pay awarded to permanent new joiners rising at the weakest pace in nearly three years.

“The downturn in hiring activity in Scotland reflected the trends seen across the UK as a whole, with many employers pausing recruitment decisions until the economic environment improves and market confidence revives.”