The latest KPMG and Recruitment and Employment Confederation (REC) UK Report on Jobs survey for 2026 signalled a modest improvement in hiring conditions in January, with the pace of decline in permanent placements slowing to its weakest level in 18 months. Temporary billings also returned to growth, though gains remained marginal amid subdued business confidence and tight client budgets.

Permanent staff appointments continued to fall in January. However, the rate of contraction eased compared to late 2025, suggesting some stabilisation in the labour market, said the report based on a survey compiled by S&P Global from responses to around 400 UK recruitment consultancies.

Recruiters linked the softer downturn partly to reduced uncertainty following the government’s recent Budget announcement, which prompted some firms to proceed with hiring plans.

The latest KPMG and REC survey report showed UK hiring conditions stabilising in January 2026, with permanent placements falling at the slowest rate in 18 months and temporary billings returning to marginal growth.
Vacancies continued to decline, though more slowly, while candidate availability rose at a softer pace.
Stronger competition for scarce skills lifted starting salaries and temp wages.

Temporary billings increased for only the second time since May 2024, pointing to cautious reliance on flexible staffing solutions. Despite this, overall vacancies declined again, although the pace of reduction was the second-slowest recorded over the past seven months.

Candidate availability continued to rise at the start of the year, frequently attributed to redundancies and limited job openings. However, the rate of expansion was the softest in 12 months. Growth in permanent candidate numbers slowed markedly, while the increase in temporary staff availability also moderated.

Pay pressures intensified in January as competition for scarce skills drove stronger wage growth. Starting salaries for permanent staff rose at the fastest pace in nearly 18 months, while temporary wage inflation reached its joint-highest level since May 2024.

Demand for staff remained under pressure across the UK. Permanent vacancies contracted at a slightly slower pace than in December but continued to fall more sharply than temporary roles.

Regionally, permanent placements declined at a notably softer rate in the North of England and the Midlands, with the latter recording marginal growth. London and the South continued to see more pronounced reductions. Temporary billings rose sharply in the Midlands and increased in the South for the first time in two years, while the North of England recorded another steep fall. London posted a solid but softer decline.

Sectorally, permanent staff vacancies decreased across all ten monitored job categories. Nursing, medical and care roles saw the sharpest contraction, whereas engineering recorded the mildest decline. In the temporary segment, blue-collar roles were the only category to register growth, albeit marginal. Nursing, medical, care and retail experienced the steepest drops in temporary demand.

Overall, while January data point towards tentative stabilisation, recruitment activity remains constrained by fragile market confidence and ongoing cost pressures.

Commenting on the latest survey results, Lisa Fernihough, head of advisory at KPMG UK said: “After a difficult end to last year, it’s encouraging to start this year with tentative signs that hiring appetites are beginning to improve as chief execs respond to signs of easing uncertainty by starting to push forward with their plans.

“Skills shortages in specialist areas continue to impact the market, particularly where competition for talent remains intense. There are parts of the economy poised for investment, and as skills needs align with greater market stability, we could start to see more consistent improvement in hiring as the year progresses.”

Neil Carberry, REC chief executive, said: “There have been increasing signs from businesses as we enter 2026 that uncertainty on hiring plans is giving way to action. That does not mean a general hiring upswing, but the ‘wait-and-see’ period seems to be ending. Rising temp billings and a levelling off in the permanent market speak to these clearer plans. REC members across the country report a change in tone since the start of the year.

“The decisions firms are now making involve lots of trade-offs, such as whether to create jobs in the UK or elsewhere, or which jobs need the human touch as opposed to an automated solution. A growing, inclusive economy requires high levels of employment—a focus on encouraging firms to create jobs rather than discouraging that investment is more important than ever. So far, the government has struggled to convince businesses it wants them to hire. That has to change in the decisions that are made this year if we are to avoid a continued rise in unemployment.”

Fibre2Fashion News Desk (SG)