Recruitment Industry Trends
Following the publication of the KPMG and REC, UK Report on Jobs for December 2025, Paul Sharpe, Founder of NorthStar People, shares a summary of the key findings and what they mean for the recruitment industry as we start 2026.
Key Findings for January 2026 UK Labour Market
Permanent Placements
- Permanent placements fall at the sharpest rate since August, extending the current trend of falling placements that began in October 2022.
- The Permanent Placements Index fell to 44.3, remaining firmly below the neutral 50 mark.
- The latest decline in permanent staff appointments was generally linked by recruiters to weak business confidence caused by economic uncertainty and rising costs.
- Marked falls in permanent placements were seen across all four monitored English areas bar the Midlands.
Temporary Billings
- Temporary billings decline at a quicker, but mild rate, with the index at 47.6.
- Although quicker than in November, the rate of reduction was mild and slower than the average for 2025. There were a number of reports that billings had fallen due to subdued economic conditions and employer concerns around costs.
- The Midlands was the only English region monitored by the survey to record an increase in temp billings in December, with the rate of growth sharp overall. However, this was not enough to offset steep declines in London and the North and South of England.
Demand for Staff (Vacancies)
- The steeper reduction in overall demand for workers was driven by a quicker drop in permanent vacancies, as temp roles declined at a slower rate.
- Vacancies for permanent staff in the private sector declined at the sharpest rate in four months in December. Demand for temporary private sector workers, meanwhile, fell at a solid pace that was unchanged from November.
- Official ONS data showed that vacancies were little-changed in the three months to November. The number of job opportunities stands 8.3% below the level seen before the COVID-19 pandemic.
Staff Availability
- There was another substantial increase in the availability of candidates at the end of the year.
- Permanent candidate numbers rose again in December, thereby stretching the current period of expansion that began in March 2023.
- For the thirty-fourth month in a row, an increase in temporary staff availability was recorded in December. The rate of growth eased from the previous month and, while sharp, was the slowest seen since last April.
- All four monitored English regions registered higher temp candidate numbers at the end of the year, with the steepest increase seen in London.
Pay Pressures
- Permanent pay rose due to efforts to attract and secure staff, particularly where the supply of candidates remained low.
- Pay rates for temporary workers increased in December, after broadly stagnating over the prior two months.
- Pay growth was largely driven by a solid increase in wages in the Midlands, as marginal rates of inflation were signalled for the South and North of England. In contrast, London recorded a fractional fall in temp pay.
Skills Landscape
Skills can be reported as being both in short supply and excess supply as we survey various recruitment agencies across the country, so there is geographical variation, as well as the possibility of candidates with particular skills being concentrated in certain areas.
- Skills in short supply (Permanent staff): Accounting/Financial, IT/Computing, and Construction.
- Skills in short supply (Temporary staff): Blue Collar, Construction and Engineering.
- Skills in excess supply (Permanent staff): Executive/Professional, IT/Computing, and Other.
- Skills in excess supply (Temporary staff): Blue Collar, and Executive/Professional.
A deeper insight can be seen inside KPMG and REC, UK Report on Jobs section 6 - Demand for skills.
Paul Sharpe's perspective
Market Overview: Hiring Activity & Confidence
- Hiring Contraction: Both permanent placements and temporary billings declined at the end of 2025. Permanent placements fell at their sharpest rate since August, marking 39 consecutive months of decline.
- Employer Caution: The downturn is primarily driven by weak business confidence, rising cost pressures, and high global economic uncertainty. Many firms have paused hiring or are "flexing" by using temporary staff instead of making permanent commitments.
- Regional Variation: The Midlands was a notable exception (again!), being the only region to see growth in both permanent placements and temporary billings in December.
Candidate Availability & Demand
- Sharp Rise in Supply: Candidate availability continues to expand at a substantial pace, driven largely by redundancies and a lack of new job opportunities.
- Falling Vacancies: Demand for staff declined at a slightly quicker pace in December. Permanent vacancies saw a stronger fall than temporary roles.
- Sector Highlights: Permanent vacancies fell across all monitored sectors, with the sharpest drops in Secretarial/Clerical and IT & Computing. Engineering saw the softest decline in permanent demand.
Pay & Salary Trends
- Starting Salary Growth: Despite weak hiring, permanent starting salary inflation hit a seven-month high as firms competed to attract specific, high-quality talent.
- Temp Pay Recovery: Temporary wages returned to growth in December after two months of stagnation, though the increase remains below historical averages.
Strategic Insight: Inclusive Recruitment
- Growing Demand: Inclusive recruitment practices (such as diverse interview panels and anonymised CVs) have reached an all-time high in implementation.
- Upselling Opportunity: Two-thirds of clients are looking to enhance their Equality, Diversity, and Inclusion (EDI) efforts, offering recruiters a strategic opportunity to provide value-added services.
Looking Ahead
- Near-Term Outlook: Restraint is expected to continue into early 2026. I keep saying this and won't stop... look at what you are selling to drive profit. The future is NOT contingent recruitment. Customer loyalty is declining, fill rates are declining, and the average margin to operating profit ratio is now sitting at 18%. If these aren't obvious signs customers want something else, I don't know what is!
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