Why is graduate recruitment down 5 per cent?

The number of graduates being recruited by major employers fell 5 per cent in 2017, the first annual drop in five years, according to a new survey.

The Graduate Market in 2018 – a study by High Fliers Research of graduate vacancies, starting salaries and undergraduate work experience programmes at the UK’s 100 leading graduate employers – found significantly fewer graduates than expected were recruited in 2017.

Private sector graduate recruitment was down 10 per cent despite overall employment levels remaining buoyant. Earlier this month, REC statistics suggested permanent employment was picking up pace, with demand for staff described as ‘strong’.

Overall graduate recruitment by leading employers – including Goldman Sachs, Unilever and BP –  had been forecast to rise by up to 10 per cent in 2017, but the report said uncertainty about the impact of Brexit was a key factor in a cut of 4.9 per cent year-on-year.

The largest drop was seen in accounting and professional services firms, banking and finance and City investment banks in particular. However, employers are more optimistic about the year ahead, with graduate recruitment expected to recover by 3.6 per cent in 2018.

Martin Birchall, managing director of High Fliers Research, said: “It’s clear that the uncertainty caused by Brexit has already hit the graduate job market. Although employers in a number of key industries and business sectors are hoping to increase their graduate recruitment again in 2018, the outlook of many recruiters remains cautious for the year ahead.”

Laura-Jane Rawlings, CEO at Youth Employment UK, said the labour market was currently “really tough” for young people, but she said Brexit was not the only factor.

Rawlings said uncertainty around Brexit, combined with the introduction of the apprenticeship levy, meant many big businesses were holding fire on recruitment while they considered what their youth employment strategy would look like going forward.

“In two to three years, the apprenticeship levy will be a phenomenally good piece of policy but what it has done short term is to make employers stop and take their foot off the pedal,” Rawlings said. “Short term – this year, last year and next year – it will slow down youth recruitment. Eventually, the upside will be that once employers have upskilled their current workforce, they will look at what they need to do to bring in more young people,” Rawlings said.

She added that the apprenticeship levy meant big businesses are more incentivised to employ young people, which could result in a reduction in graduate recruitment as companies recognise that graduates don’t always have the exact skills their business needs, so they still need to invest in training.

Geraint Johnes, research director at the Work Foundation and Professor of economics at Lancaster University Management School, said that although the High Fliers data had only analysed 100 businesses, the results broadly aligned with the labour market as a whole.

“A lot of employers, especially in big businesses and sectors that have traditionally employed a lot of graduates, have been cautious and delayed recruitment while the scenario [around Brexit] remains uncertain,” he said.

Agreeing with Rawlings, Johnes said he felt the introduction of the levy had also caused some businesses to pause on recruitment. “The levy is something industry is still coming to terms with. It is a matter of businesses sorting out what they want to do and then Brexit is overlying that and causing great uncertainty,” he added.

The survey findings were published amid growing concern about the value of a degree and a potential over-supply of graduates. The House of Lords Select Committee is conducting an inquiry into the economics of higher, further and technical education, while a November 2017 study from the CIPD suggested that barely half of graduates were in graduate-level jobs six months after leaving education.