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Graduate labour market in 2018

October 2018

Outcomes for 2016/17 graduates were generally very positive, with employment up and unemployment down, average starting salaries increasing in all regions of the UK, and more graduates in professional-level roles

For the UK, 2017 was a politically disruptive year. The government triggered Article 50 of the Lisbon Treaty at the end of March and then called a general election, which unexpectedly resulted in a hung parliament and a weakened government preoccupied by Brexit.

As 2018 continues, little has changed: the process of Brexit has become bogged down by internal political wrangling, and business uncertainty is heightened by the unclear direction of domestic and global trade policies - with protectionism and trade barriers becoming more prominent.

Despite all of this, the UK graduate labour market remains robust and by some measures is as strong as it has been for some time.

Outcomes six months after graduation,Number of graduates 
Working full time in the UK,55.2
Working part time in the UK,11.9
Working overseas,1.8
Working and studying,5.4
Further study,16.1
"Unemployed, including those due to start work",5.1
Other,4.5

329,325 UK-domiciled graduates received first degrees in 2017. This was an increase of 4% from 2013 levels, but well below the 2014 peak in graduate numbers.

Compared with 2015/16, the employment rate remained reasonably steady, rising from 74.2% to 74.3%, while the proportion of employed graduates in professional roles increased from 71.4% to 73.9%.

Unemployment fell to its lowest in 39 years (5.1%), while further study rose sharply, particularly among those studying Masters degrees. As many as 41,005 first-degree graduates went straight into further study after graduating, up from 39,135 in the previous year. This was likely due to the introduction of the postgraduate loans system.

Nursing sees biggest increase in graduate intake

Some occupations witnessed an increased intake of first-degree graduates compared with previous years. Nursing led in this respect with 1,785 more graduates than last year.

Other increasingly popular occupations were:

  • software developers
  • marketers
  • management consultants
  • midwives
  • artists
  • photographers
  • niche or specialist engineers
  • business project managers
  • sports coaches
  • paramedics
  • housing officers.

However, some occupations experienced declining numbers of graduate entrants. This was the case for teaching, graphic design, public relations (PR), journalism, youth work and probation. Surveying also saw another fall, despite the industry suffering one of the most severe occupational shortages in the UK.

Difficulties attracting graduates to certain industries have been a feature of the graduate labour market since the recovery from the last recession began

Recruitment difficulties most acute for graduate jobs

Difficulties attracting graduates to certain industries have been a feature of the graduate labour market since the recovery from the last recession began in earnest. 2018 has seen more warnings about the effect on the wider UK economy.

Dr Adam Marshall, director general of the British Chambers of Commerce (BCC), warned at the start of the year that 'labour and skills shortages are set to be the biggest potential drag anchor on business in 2018, since ultimately it is people that make businesses work'.

The BCC's Quarterly Economic Survey (QES), published on 10 January, reported that 71% of firms in the service sector experienced recruitment difficulties in 2017. The trickiest roles to recruit were managerial and professional - graduate jobs, in other words.1 In July 2018, Marshall continued his warnings, stating that 'the availability of skilled staff remains the biggest issue that firms face'.2

Meanwhile, according to the Bank of England's Agent's summary of business conditions for Q2 2018, 'recruitment difficulties remained elevated and were widespread across sectors and job roles. There were a growing number of reports of vacancies taking longer to fill, and in a small number of cases labour shortages were constraining headcount growth.

'This was particularly the case where skill shortages were most acute, e.g. construction trades, drivers, specialist engineering and information technology (IT).'3

With the exception of drivers, these shortages are almost all at graduate level.

This may have helped to fuel a modest rise in the average starting salary for graduates, up 2.9% from £21,776 to £22,399. All regions of the UK saw a rise, with the Midlands, East of England and Northern Ireland seeing the largest percentage increases.

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What do graduates do? 2018/19

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More graduates secure professional jobs

The data shows that 73.9% of employed graduates secured jobs in professional roles, 7,895 more than in 2015/16.

This trend was evidenced across degree subjects and is possibly due in part to the recruitment difficulties detailed above. More graduates in shortage subjects such as IT and engineering went into their vocationally linked roles, and others in areas where employers have registered concern, such as accountancy and marketing, showed the same pattern.

There are longstanding and persistent concerns about skills mismatch and the underutilisation of graduates

By far the largest employer of graduates in non-professional roles was the retail industry, which, along with the service industry, also had the highest proportion of graduates on zero-hour contracts. Significantly, these were not confined to non-professional roles, as nearly a quarter (23%) of graduates on such contracts was in professional-level jobs across a range of industries.

Although the number of working graduates on permanent, full-time contracts after six months rose to 61.3%, and the number on fixed-term contracts of at least 12 months held steady, the proportion on zero hour contracts also rose to 4% of the employed (up from 3.6% last year). Consequently, there are longstanding and persistent concerns about skills mismatch and the underutilisation of graduates.

Graduates increasingly drawn to urban centres

The data also suggests that the graduate labour market is becoming more urban. The proportion of graduates starting their career in London increased to 22.4% of all graduates. 41,290 graduates found jobs in the capital, with 6,080 of these in Westminster alone, 4,065 in the City of London and 3,490 in the London Borough of Camden.

Location,Number of graduates
Kent,3035
Hertfordshire,3090
Surrey,3180
Glasgow,3370
Leeds,3625
Manchester,4420
Birmingham,4670

All the major metropolitan areas saw rises in the number of graduates (with the exception of West Yorkshire, where numbers held steady) and the proportion working in the UK outside large metropolitan areas fell from 59% to 58.5%.

Despite the Brexit-induced uncertainty cast over Britain's political and economic future, the UK's graduate labour market appears not to have been negatively impacted. This bodes well for current graduates and looks set to continue into 2019.

Also in this series

Notes

  1. Quarterly Economic Survey, British Chambers of Commerce, 2017.
  2. Quarterly Economic Survey, British Chambers of Commerce, 2018.
  3. Agent's Summary of Business Conditions, Bank of England, 2018.

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