As 2026 gets underway, the UK recruitment market is showing signs of stabilisation after a prolonged period of caution. The latest KPMG and REC Reports on Jobs, produced in association with S&P Global, suggest that while hiring conditions remain challenging, the pace of decline is easing and confidence is beginning to edge back into decision-making. For employers, recruiters and candidates alike, the message is clear: the market is no longer in freefall, and selective opportunities are emerging.
Across the UK, permanent placements continued to decline in January, extending a long-running contraction. However, the rate of decline slowed to its softest level in around 18 months, indicating that employers may be moving beyond a “wait-and-see” mindset. Some organisations have begun lifting hiring freezes, supported by easing uncertainty and greater clarity following last year’s policy announcements. While this does not yet signal a broad-based hiring rebound, it does suggest that the floor of the market may be coming into view.
One of the clearest green shoots is in the temporary and contract market. UK-wide temporary billings rose for the first time in three months, and only the second time since mid-2024. This reflects a renewed preference for flexibility, with businesses using short-term hires to manage risk, test new projects and rebuild capacity without committing to long-term headcount. Historically, temp hiring has often been an early indicator of wider recovery, making this a trend worth watching closely.
Regional Signals: South of England and London
The regional reports add further nuance. In the South of England, January marked a notable milestone: temporary billings moved into growth territory for the first time in two years. While modest, this upturn suggests that employers in the region are beginning to re-engage with the labour market after an extended period of restraint. Permanent placements continue to fall, but at a slower pace than in late 2025, reinforcing the sense that momentum is gradually improving rather than deteriorating further.
London’s market remains more subdued, reflecting its exposure to global uncertainty and cost pressures. Permanent placements and temporary billings both declined again in January. However, here too the pace of contraction eased. Recruiters report that while hiring activity is still muted, the market may be starting to find its footing, with firms willing to invest when the right skills are available. This willingness to hire selectively, even in a cautious environment, points to underlying confidence in future growth rather than wholesale retrenchment.
Candidate Availability:
Candidate availability continued to rise across the UK, driven in part by redundancies and fewer job opportunities. Importantly, though, the rate of increase slowed to its softest level in a year. This suggests that while supply remains elevated, some candidates are beginning to move successfully into roles, and the pace of job shedding may be easing. In the South of England, the slowdown in rising availability was particularly marked, hinting at improving balance between supply and demand.
For employers, this creates a window of opportunity. A larger talent pool makes hiring easier in the short term, but slowing growth in availability suggests that competition for in-demand skills could intensify again as confidence returns.
Skills and Pay: Competition Persists Where It Matters
Despite weaker overall demand, skills shortages remain a defining feature of the market. Across permanent and temporary roles, recruiters continue to report shortages in areas such as IT and digital (including AI, cloud and cyber), engineering, construction, healthcare and specialist finance. These shortages are shaping employer behaviour and underpinning continued pay growth.
Starting salaries rose again in January, marking the strongest increase in nearly a year and a half at the UK level. Temporary wages also accelerated, with London in particular seeing sharp increases as employers raised rates to secure scarce contract talent. While overall earnings growth in the wider economy has moderated, recruitment data shows that pay competition remains intense for critical skills, reinforcing the value of specialist expertise even in a slower market.
A Measured but Hopeful Outlook
Taken together, the January data paints a picture of a recruitment market that is tentatively turning a corner. Demand remains below historic norms and vacancies continue to fall, but the rate of decline is easing, temporary hiring is reviving and pay pressures reflect ongoing competition for talent. Businesses are beginning to act again, albeit carefully, and are increasingly focused on quality, flexibility and future-proof skills.
For The Talent World community, this environment rewards preparedness and agility. Candidates with in-demand skills are well positioned, particularly in technology, engineering and healthcare. Employers who move early may find an opportunity to secure talent before confidence strengthens and competition intensifies.
This cautiously optimistic outlook is grounded in the latest insights from KPMG and the Recruitment & Employment Confederation (REC), whose monthly reports continue to provide one of the most authoritative readings of the UK labour market. While challenges remain, early 2026 is starting to look less like an extension of decline and more like the beginning of a gradual, uneven recovery.