UK hiring is almost back. Here’s why recruiters aren’t popping the champagne yet
The UK job market is showing tentative signs of life after a prolonged slowdown, with permanent hiring contracting at its weakest rate in nearly three years, the latest KPMG and REC UK Report on Jobs shows.
Permanent staff appointments fell only marginally in February, the softest decline recorded since March 2023.
This marks the closest the market has come to stabilisation in almost three years, with overall demand for workers easing at the slowest pace in nine months. Temporary billings also dropped modestly, following a slight uptick earlier in the year.
Vacancies continued to shrink, but at the gentlest rate since last May, driven mainly by a softer contraction in permanent roles. Starting salary inflation cooled to its slowest pace since October, remaining well below long-term averages, while temporary wage growth also moderated amid rising candidate availability.
Engineering stood out as the only sector seeing improved demand for permanent staff, while retail and hotel & catering faced the steepest reductions in vacancies. Broader declines in temporary worker demand persisted, with retail hit hardest.
Far from celebratory
Despite these glimmers of improvement, recruiters and business leaders are far from celebratory. The report highlights persistent subdued conditions, with businesses grappling with economic uncertainty and external shocks from global events.
Jon Holt, Group Chief Executive and UK Senior Partner at KPMG, described the data as the “strongest signs of improvement in three years,” with hiring nearing positive territory. However, he cautioned that the economy was not out of the woods yet.
“Resilience is now the new normal, so it is likely we may see these signs of recovery stall again in the near term as chief execs take stock.”
Neil Carberry, Chief Executive of the Recruitment and Employment Confederation (REC), echoed the tempered optimism. “While February’s report is by no means a source of unalloyed celebration, it does suggest that the worst of the hiring slowdown has passed. There may still be a few bumpy months to come, especially in light of global instability,” he said.
Both leaders noted that a genuine turnaround hinges on restored confidence among businesses and consumers. Policy measures to lower the cost of doing business, such as reforms to employment rights, energy costs, business taxes, and planning, could unlock spending and sustainable job creation.
The findings align with a pattern of cautious employer behaviour amid lingering pressures.
Permanent placements have now declined for 41 consecutive months in some readings, though the pace is clearly easing. Recruiters report that improved candidate supply is helping contain wage pressures, but competition for specialised skills persists in pockets like engineering.
