The latest KPMG and REC UK Report on Jobs, covering May 2026 data collected between 12-22 May, reveals a cooling labor market shaped by heightened business caution. Global tensions, including the conflict in Iran, combined with domestic political instability, have prompted employers to scale back permanent hiring while turning to more flexible staffing arrangements. This, according to insights from KPMG.
KPMG also mentioned that permanent staff placements fell at the fastest rate in ten months during May, marking the sharpest decline since July of the previous year.
Recruitment consultancies reported widespread hesitation among companies, driven by subdued confidence in the economic outlook and rising cost pressures.
Many organizations that still needed additional capacity opted for temporary or contract workers instead, leading to the strongest increase in temporary billings in over three years.
This shift highlights a preference for agility in an unpredictable environment.
Overall staff demand contracted at a slightly quicker pace than in the prior month.
A pronounced drop in permanent vacancies outweighed a much slower decline in short-term roles, with temporary vacancies falling at the weakest rate in 22 months—approaching stabilization.
This divergence underscores how businesses are preserving flexibility rather than committing to long-term hires.
On the supply side, candidate availability rose sharply once again.
Redundancies, reduced job openings, and heightened job security concerns contributed to a rapid expansion in the labour pool.
The increase in permanent candidate supply accelerated modestly compared to April but remained below the typical levels observed throughout much of 2025.
Availability of temporary workers grew at the fastest pace in six months, providing employers with a ready pool of flexible talent.
Wage pressures stayed muted across the board.
Starting salaries for permanent roles and hourly rates for temporary positions both advanced only modestly, with growth softening slightly from April and remaining well below long-term historical averages.
Improved candidate supply, softer demand, and tighter budgets from clients all helped restrain pay inflation.
Regional patterns varied. Permanent placements saw notable declines in the Midlands and South of England, with London experiencing a renewed solid drop. The North of England stood out as the only region posting a marginal increase.
Temporary billings rose across all four monitored English regions, strongest in the South and softest in London.
Sector-wise, Nursing, Medical, and Care was the sole category to see higher demand for permanent staff. Engineering vacancies stagnated, while other areas contracted—most sharply in Retail.
For temporary roles, four out of ten monitored categories recorded improved demand, led by Blue Collar positions. Retail again posted the steepest fall in short-term vacancies.
Jon Holt, Group Chief Executive and UK Senior Partner at KPMG, commented: businesses are growing more cautious due to ongoing global and domestic uncertainties, which is clearly influencing hiring.
While some are using temporary contracts for flexibility, many permanent plans are being deferred.
Stability and confidence are essential for investment, and with both under strain, the jobs outlook remains subdued in the medium term.
Neil Carberry, Chief Executive of the REC, emphasized the role of temporary work in sustaining momentum amid challenges like higher costs, the Gulf crisis, and new employment regulations.
May’s strong growth in temporary placements demonstrates its value in keeping the economy moving.
He urged policymakers to support a well-regulated temporary and contract workforce, including reforms to zero-hours arrangements.
Compiled by S&P Global from responses by around 400 UK recruitment consultancies, the report indicates a picture of a resilient yet cautious labor market. Temporary staffing is bridging gaps where permanent hiring has faltered, but sustained uncertainty could continue to weigh on any ongoing economic recovery.
