The UK recruitment market is showing early signs of improvement as businesses begin to regain confidence in hiring, with permanent placements stabilising and demand for temporary workers continuing to strengthen.

The latest KPMG and REC UK Report on Jobs, compiled by S&P Global from responses gathered from around 400 recruitment and employment consultancies, points to a recruitment landscape that remains challenging but is beginning to trend more positively.

After an extended period of contraction, permanent placements stabilised in July, while temporary billings increased for the fourth consecutive month. Temporary vacancies also rose for the first time in two years, suggesting that employers are increasingly turning to flexible workforce solutions while remaining cautious about permanent hiring.

Here are a few highlights:

• Permanent placements have stabilised, ending 45 months of decline.
• Temp/Contract vacancies increased for the first time in two years.
• Temp/Contract billings have now increased for four consecutive months, the strongest growth in years.
• Engineering is one of the strongest areas for Temp/Contract vacancy growth, which is particularly relevant to us.
• Starting salaries and contractor rates are also increasing again, suggesting businesses are fully aware they have to pay a competitive salary to attract and compete with counteroffers and competitors.

Permanent recruitment finally begins to stabilise

One of the most significant findings from the latest report is the stabilisation of permanent placements.

The permanent placements index had experienced 45 months of decline, making July's stabilisation an important milestone for the UK recruitment market.

While permanent hiring remains subdued, the latest figures suggest that businesses may be beginning to move beyond the prolonged caution seen over recent years.

Political and economic uncertainty, alongside higher employment costs, continues to influence recruitment decisions. However, some businesses are progressing with hiring linked to new projects and investment, indicating that employers are becoming more willing to commit to additional headcount where there is a clear business need.

For recruiters and employers alike, the end of the prolonged decline could represent an important turning point.

Temporary hiring continues to gain momentum

While permanent recruitment is beginning to stabilise, temporary recruitment is already showing stronger momentum.

Temporary billings increased for the fourth consecutive month, with growth remaining among the quickest recorded since early 2023.

Temporary vacancies also increased for the first time in two years, with the latest rise the strongest since August 2023.

This continued demand for temporary workers reflects a wider shift towards workforce flexibility. Businesses can increase capacity without making the same long-term commitment associated with permanent recruitment, making contract and temporary hiring particularly attractive when economic conditions remain uncertain.

For employers managing fluctuating workloads, project-based requirements or skills shortages, temporary recruitment can provide a way to access specialist talent quickly while maintaining greater flexibility.

Pay growth strengthens as employers compete for skills

Another positive indicator from the latest data was an improvement in pay growth.

Starting salaries increased at the fastest rate for six months, while temporary wages recorded their strongest increase in 26 months.

Recruiters continued to report a lack of suitably skilled and experienced candidates for particular positions. This suggests that, despite the overall increase in candidate availability, employers are still facing competition for specialist talent.

This is particularly relevant in technical and professional sectors where experience, qualifications and specialist knowledge can be difficult to replace.

For businesses, the message is clear: having more candidates in the market does not necessarily mean that the right candidates are easier to find.

Candidate availability continues to rise

Candidate availability increased again in July, extending the current period of growth to almost three-and-a-half years.

However, the rate of increase slowed to its lowest level since February. Temporary candidate supply also recorded its slowest increase since May 2023.

The continued growth in candidate numbers has largely been linked to redundancies and a lack of available job opportunities. While this provides employers with a larger pool of potential applicants, businesses still need to distinguish between simply having access to more CVs and having access to candidates with the right skills and experience.

This is where effective recruitment strategies remain important.

A larger candidate pool can increase choice, but specialist roles can still require targeted searches, strong employer branding and a proactive approach to passive candidates.

Employers are preparing to increase hiring

The latest recruitment outlook is supported by further employer sentiment around future hiring.

34% of employers plan to increase permanent hiring before the end of the year, while 25% expect to increase contract recruitment and 24% plan to expand project-based hiring.

Technology and IT are among the strongest areas for expected permanent recruitment, with almost half of employers in the sector planning to increase hiring.

Other areas showing increased demand include:

• Cybersecurity
• Accounting
• Risk and compliance
• Digital marketing
• Legal
• Customer support

The findings suggest that employers are becoming increasingly targeted in their recruitment strategies, focusing investment on areas where specialist skills can directly contribute to business objectives.

Skills shortages remain a challenge

Despite increasing candidate availability, competition for highly skilled talent remains a concern.

More than a quarter of employers expect competition for highly skilled workers to increase, while 64% of large organisations and six in ten small and medium-sized businesses are focusing on training and development to address workforce challenges.

Around 36% of employers are also redesigning roles and ways of working.

This highlights an important development in the recruitment market. Hiring is not simply about increasing headcount. Businesses are also considering how they structure roles, develop existing employees and use technology to address skills shortages.

Artificial intelligence is becoming part of this conversation too. Employers increasingly need people who can work effectively alongside AI while bringing skills such as critical thinking, judgement, communication and problem-solving that technology cannot easily replicate.

Regional differences remain

The improvement in recruitment activity has not been evenly distributed across the UK.

London and the Midlands recorded renewed increases in permanent staff hiring, with London experiencing growth at close to a four-year high. However, permanent hiring continued to decline across the South and North of England.

Temporary recruitment presented a different picture. The North recorded the strongest increase in temporary billings, followed by London. A milder increase was seen in the South, while temporary billings fell slightly across the Midlands.

These regional differences demonstrate why recruitment strategies need to take local market conditions into account. Candidate availability, salary expectations and employer demand can vary considerably between regions.

Engineering and technical recruitment continues to benefit

The latest figures are particularly relevant to technical recruitment.

Temporary vacancies increased across seven of the monitored sectors, with Blue Collar and Engineering recording the strongest increases.

At the same time, permanent recruitment increased across three sectors, with Nursing, Medical and Care recording the strongest growth.

For technical employers, continued demand for engineering and specialist skills reinforces the importance of having access to qualified candidates when projects and workloads increase.

This is particularly significant for businesses using contract or project-based recruitment, where delays in finding the right specialist can have a direct impact on project timelines and costs.

What does this mean for employers?

The latest figures suggest that businesses should prepare for a recruitment market that is becoming more active, rather than assuming the cautious conditions of recent years will continue indefinitely.

For employers, this means:

• Review upcoming recruitment requirements.
  If permanent hiring is expected to increase later in the year, identifying skills requirements and starting the recruitment process early can help businesses avoid unnecessary delays.

• Consider flexible workforce solutions.
  The continued rise in temporary billings demonstrates that contract and temporary recruitment remain an important part of workforce planning.

• Don't overlook specialist candidates.
  A larger candidate pool does not automatically mean that specialist talent is readily available. Highly skilled professionals can remain difficult to attract and that’s where we as recruiters come in, with access to the passive market..

• Invest in retention and development.
  With many businesses increasing their focus on training, employers have an opportunity to develop existing employees while reducing their reliance on an increasingly competitive external talent market.

• Be prepared to compete on more than salary.
  Career progression, flexibility, training, benefits and company culture can all influence a candidate's decision when multiple employers are competing for the same specialist skills.

What does this mean for candidates?

The improving recruitment landscape could also provide more opportunities for jobseekers.

Permanent placements stabilising and temporary vacancies increasing suggest that more employers are beginning to reconsider their workforce requirements.

For candidates, this could create opportunities across both permanent and contract markets.

However, employers remain selective, particularly when recruiting for specialist positions. Candidates should therefore focus on demonstrating the skills, experience and value they can bring to an organisation rather than relying solely on their CV.

For technical professionals, keeping qualifications and industry knowledge up to date can also help when competition for specialist roles remains high.

A recruitment market beginning to turn a corner

The UK recruitment market is not yet experiencing a full recovery, but the latest data provides several encouraging signals.

Permanent placements have stabilised after 45 consecutive months of decline. Temporary billings have increased for four months in a row. Temporary vacancies have risen for the first time in two years, while pay growth for both permanent and temporary workers has strengthened.

At the same time, candidate availability remains high, giving employers greater choice in many areas.

The key question now is whether these early signs of improvement develop into sustained growth.

For businesses, the coming months could be an important opportunity to reassess workforce plans, secure specialist talent and consider where permanent, temporary and project-based recruitment can support future growth.

The recruitment market may not be fully recovered yet, but after several years of challenging conditions, the latest figures suggest that the direction of travel is becoming more positive.

Looking to hire or find a new job? Get in touch with our team of technical recruitment specialists.