KPMG and REC, UK Report on Jobs February 2026

Key findings

• Temp billings expand slightly for the first time in three months
• Candidate availability increases at softest rate in a year
• Stronger rises in both starting salaries and temp wages

Data collected 12-26 January

Summary

The first KPMG and REC, UK Report on Jobs survey for 2026 pointed to a relative improvement in hiring conditions in January. Recruiters signalled a softer drop in permanent staff appointments along with a fresh increase in temp billings. However, subdued overall market confidence and squeezed client budgets continued to dampen overall staff recruitment. Consequently, vacancies continued to decline, albeit at a slower pace than seen at the end of 2025.

The upturn in candidate availability meanwhile lost pace in January. Whilst sharp, the latest increase in staff supply was the slowest recorded in a year. At the same time, both starting salaries and temp wages increased at steeper rates amid greater competition for in-demand skills.

The report is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

Downturn in permanent staff hiring eases

UK recruitment companies signalled a further decline in permanent placements in January amid reports of generally weak market conditions and employer concerns over costs. That said, the pace of reduction eased to the weakest in 18 months. Some companies reportedly pressed ahead with recruitment plans as a degree of market uncertainty had lifted following the government Budget announcement. At the same time, temp billings rose for only the second time since May 2024, though growth was marginal.

Permanent Placements Index (blue)

Temporary Billings Index (green)

50.0 = no-change

Sources: KPMG, REC, S&P Global PMI.

Softest rise in candidate availability for a year

The supply of candidates continued to rise at the start of 2026, which was frequently linked to redundancies as well as fewer job opportunities. However, the rate of expansion was the softest seen in 12 months. This was predominantly driven by a slowdown in growth of permanent candidate numbers, though temp candidate availability also improved at a weaker pace.

Pay trends improve for both permanent and temporary staff

Competition for skills that were often in short supply reportedly added further upwards pressure on rates of starting pay in January. Notably, starting salaries increased at a solid pace that was the quickest for nearly a year-and-a-half, while temp wage inflation hit the joint-highest since May 2024.

Demand for staff declines at slower but still sharp rate

Overall vacancies across the UK continued to decrease at the start of the year. The rate of reduction remained sharp, despite easing to the second-slowest seen over the past seven months. Demand for permanent staff contracted at a slightly softer pace than in December, but one that remained quicker than for temporary workers.

Regional and Sector Variations

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 rose sharply in the Midlands and increased for the first time in two years in the South of England. Meanwhile, a steep reduction was once again seen in the North of England, while London recorded a softer, but nevertheless solid decline.

Permanent staff vacancies declined across all ten monitored job categories at the start of the year. The sharpest reduction was seen across the Nursing/Medical/Care sector, while the softest fall was recorded across the Engineering category.

Blue Collar was the only employment category to register an increase in temporary staff demand in January, though the rate of growth was marginal. Meanwhile, Nursing/Medical/Care and Retail recorded the steepest falls in temporary job opportunities.

Comments

Commenting on the latest survey results, Lisa Fernihough, Head of Advisory at KPMG UK said:

“After a difficult end to last year, it’s encouraging to start this year with tentative signs that hiring appetites are beginning to improve as chief execs respond to signs of easing uncertainty by starting to push forward with their plans.

“Skills shortages in specialist areas continue to impact the market, particularly where competition for talent remains intense. There are parts of the economy poised for investment, and as skills needs align with greater market stability, we could start to see more consistent improvement in hiring as the year progresses.”

Neil Carberry, REC Chief Executive, said:

“There have been increasing signs from businesses as we enter 2026 that uncertainty on hiring plans is giving way to action. That does not mean a general hiring upswing, but the “wait-and-see” period seems to be ending. Rising temp billings and a levelling off in the permanent market speak to these clearer plans. REC members across the country report a change in tone since the start of the year.

“The decisions firms are now making involve lots of trade-offs, such as whether to create jobs in the UK or elsewhere, or which jobs need the human touch as opposed to an automated solution. A growing, inclusive economy requires high levels of employment – a focus on encouraging firms to create jobs rather than discouraging that investment is more important than ever. So far, the Government has struggled to convince businesses it wants them to hire. That has to change in the decisions that are made this year if we are to avoid a continued rise in unemployment.”

Comments

Commenting on the latest survey results, Jon Holt, Group Chief Executive and UK Senior Partner KPMG, said:

“The jobs market at the end of 2025 was still signalling caution. After a long stretch of rising cost pressures and higher global economic uncertainty, many firms continue to pause hiring and are flexing where they can by using temporary staff.

“As we head into the New Year, this restraint is likely to remain in the near term. Chief execs who have been prioritising increased investment in tech to improve resilience and productivity, will be looking for signs of greater confidence in the wider economy before turning the hiring taps back on.”

Neil Carberry, REC Chief Executive, said:

“It’s always difficult to draw conclusions from jobs data in December, but the fact that the market slipped back a little on November is a reminder of the pressure employers are under. Nevertheless, the second half of 2025 showed some signs of a long run of negative data softening, and with placements falling at a slower pace than the 2025 average in December there is some hope that we are seeing a December dip, rather than a change in the trend. There is certainly a wider range of experience now, with recruitment in the Midlands growing for both temp and perm roles last month. Activity kicked off this month is what will really tell us if the tide is turning.

“Making this a better year for hiring will require a focus on building business confidence to invest. With the Budget behind us, the government needs to set out a clear path that firms can believe in, from the industrial strategy to pragmatic approaches on the Employment Rights Act, which is worrying many firms.”