Recruitment Industry Trends
Following the publication of the KPMG and REC, UK Report on Jobs for January 2026, Paul Sharpe, Founder of NorthStar People, shares a summary of the key findings and what they mean for the recruitment industry as edge closer to the market changes.
Key Findings for February 2026 UK Labour Market
The Shift Toward Temporary & Contract Billings
- Return to Growth: Temporary billings expanded in January for the first time in three months. While the growth is marginal it represents only the second expansion since mid-2024.
- Client Behaviour: Employers are increasingly favouring short-term staff and new projects over permanent commitments due to lingering cost concerns. Fair enough!
- Regional Outperformers: The Midlands saw sharp growth in temp billings (again!), while the South of England recorded its first increase in two years.
- Strategic Insight: For agency owners, this "wait-and-see" period for permanent hiring is a prime window to scale contractor desks, capturing the shift in client appetite toward flexible staffing.
Staff Appointments
- Permanent placements fall at the softest rate in 18 months. Permanent placements fell at a notably softer pace in the North of England, and was slower than those seen in London and the South. The Midlands meanwhile recorded further marginal growth
- Temp billings increase for the first time in three months. After falling in the final two months of 2025, temp billings at UK recruitment consultancies increased during January.
Vacancies
- Vacancies continue to decline sharply in January. Overall demand for staff fell for the twenty-seventh consecutive month in January,
- Trends diverged by job type, with demand for permanent staff falling at a slower pace, while the rate of decline in short-term vacancies quickened.
- Te most pronounced drop in demand was seen for permanent public sector staff in January. Permanent positions in the private sector meanwhile fell at a slower, but still marked pace.
- Latest data from the Office for National Statistics (ONS) indicated that vacancies increased modestly over the final quarter of 2025. Approximately 10,000 more job opportunities were recorded over this period.
Staff Availability
- Latest survey data pointed to a marked slowdown in growth of overall candidate numbers in January.
- Supply of permanent staff rises at softest rate in a year. Softer rises in permanent candidate availability were seen across all four monitored English areas. London registered the steepest rate of expansion overall.
- Temp candidate numbers expand at weaker but still sharp rate. Job shedding and fewer contract opportunities drove a further increase in the number of temporary candidates in January, according to recruiters.
Pay Pressures
- Latest survey data signalled an acceleration in the rate of starting salary inflation for the fourth straight month in January. Consequently, permanent pay increased at a solid pace that was the quickest recorded since August 2024.
- Temp pay growth rebounds at the start of the year. Recruiters often noted that average pay rates had risen due to competition for in-demand skills.
- Latest official data published by the ONS indicated that total employee earnings (including bonuses) increased 4.7 % in the three months to November. This marked the second-slowest rise in pay since the three months to August 2024.
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, Engineering, IT/Computing, Nurses/Medical/ Care and Construction.
- Skills in short supply (Temporary staff): Blue Collar, Construction, IT/Computing and Engineering.
- Skills in excess supply (Permanent staff): Executive/Professional, IT/Computing, Hotel/Catering and Other.
- Skills in excess supply (Temporary staff): Blue Collar, Executive/Professional and Secretarial/Clerical.
A deeper insight can be seen inside KPMG and REC, UK Report on Jobs section 6 - Demand for skills.
Paul Sharpe's perspective
In summary, the UK labour market is showing signs of change as we enter 2026. While the permanent market remains under pressure, the temporary and contract sectors are showing renewed life, reinforcing why building a robust contractor desk is now a strategic necessity for agency sustainability.
The Shift Toward Temporary & Contract Billings
- Return to Growth: Temporary billings expanded in January for the first time in three months. While the growth is marginal it represents only the second expansion since mid-2024.
- Client Behaviour: Employers are increasingly favouring short-term staff and new projects over permanent commitments due to lingering cost concerns. Fair enough!
- Regional Outperformers: The Midlands saw sharp growth in temp billings (again!), while the South of England recorded its first increase in two years.
- Strategic Insight: For agency owners, this "wait-and-see" period for permanent hiring is a prime window to scale contractor desks, capturing the shift in client appetite toward flexible staffing.
Permanent Placements: A Slowing Decline
- Stabilization: Permanent placements continue to fall, but at the slowest rate in 18 months.
- Sector Resilience: The Midlands was the only region to see marginal growth in permanent placements, while the North saw a notably softer decline compared to London and the South.
Supply and Demand Dynamics
- Candidate Availability: Overall supply is still rising, but at the softest rate in a year. This suggests the "talent deluge" caused by 2025 redundancies is beginning to level off.
- Acute Skill Shortages: Despite high availability, specialist skills—particularly in Engineering, IT/Computing, and Blue Collar sectors—remain in extremely short supply.
Looking Ahead
The current market volatility proves that relying solely on permanent fees is high-risk. We are now offering agency owners a comprehensive service to start up and scale contract desks, focusing on:
- Financial Resilience: We believe the recurring revenue generated by a contractor desk is critical for an agency’s long-term sustainability and cash flow, providing a "buffer" against the fluctuations seen in the permanent market.
- Risk & Compliance: As temp wage inflation rises and supply-side challenges persist, our expertise in compliance and risk management ensures your contract desk is built on a solid, legally sound foundation.
- Market Alignment: With temp billings expanding and permanent demand still contracting, now is the time to pivot resources toward contract services to meet current employer "trade-offs".
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