UK recruitment activity experienced a fresh contraction in October as economic uncertainty and rising costs led employers to delay or scale back hiring decisions. The latest Report on Jobs from KPMG and the Recruitment and Employment Confederation noted that permanent staff placements fell for the first time in four months and at a solid rate.
This marked the second-quickest contraction of 2026 so far, following May. Temporary billings declined for the first time in seven months, ending a growth streak as completed contracts and subdued market confidence left firms hesitant to commit to new projects.
Recruitment Trends
Even though fewer jobs were filled, wage increases picked up slightly in October. Firms raised starting salaries for permanent roles and boosted average pay for temporary workers, reflecting stronger competition for limited talent pools.
Overall wage inflation for both permanent and temporary staff stayed under the survey’s long-term averages.
Overall demand for workers across the UK fell slightly, with the reduction being the weakest in 26 months. Permanent vacancies fell at the slowest rate in over two years, while temporary work opportunities rose fractionally at the start of the fourth quarter, halting a two-month period of contraction.
Private sector demand was broadly positive, with permanent and temporary roles both increasing – albeit at modest and marginal paces respectively. Conversely, public sector vacancies continued to decline for both permanent and short-term staff, though at slower rates than in September.
Regional Variations
Maxine Bligh, interim chief executive at the REC, noted there was still positive news embedded in the report: “There are still signs of the recent resilience in London and the north of England. Both recorded growth in permanent placements.
Sector performance varied widely. Among 10 monitored categories, permanent vacancies increased in six, led by IT and computing and engineering, whereas retail and hotel and catering suffered the steepest declines. In the temporary market, blue collar roles registered the largest increase in demand, while retail saw the steepest reduction in short-term opportunities.
Candidate availability expanded rapidly in October, rebounding from a three-year low. Worker supply had now risen for 44 consecutive months, driven by redundancies and fewer job openings, found the report. Permanent staff availability rose substantially across all four monitored English areas, led by the north of England, while London saw the slowest increase despite a notable acceleration.
Regional hiring patterns revealed sharp differences. The south of England saw the steepest fall in permanent placements and temporary assignments, with solid falls also seen in the Midlands. The north of England reported a fractional rise in permanent hires and continued marked growth in temp placements.
London saw marginal growth in permanent placements alongside a sharp, accelerated rise in starting salaries and the fastest increase in temporary pay nationwide. Official data published by the Office for National Statistics reinforced the cooling trend, showing total UK vacancies falling 5.1% year-on-year to 691,000 in the three months to September.
Jon Holt, group chief executive and UK senior partner at KPMG, said: “October saw employers pull back on hiring in the month leading up to the Budget, ending a run of more positive news over recent months. Renewed geopolitical and economic uncertainty affected confidence, with further energy price shocks and a global bond sell-off pushing borrowing costs higher.
Businesses will now be assessing whether the measures announced in the Budget give them enough stability to absorb the external pressures and higher costs they face. But with the Bank of England increasing interest rates and inflation set to continue rising over the coming months, there is a risk the green shoots we had been seeing in the jobs market could stall.
Temporary candidate supply also saw a steep increase, particularly in the Midlands and the south of England.
Industry Breakdowns
Industry breakdowns showed pay rising across services at 3.3%, manufacturing at 2.7%, and construction at 1%. Private sector earnings rose 3.1%, while public sector growth softened to 6.3%.
Official earnings growth including bonuses slowed to 3.7% in the three months to August, the softest increase since late 2020. Maxine Bligh stated that the Budget was a missed opportunity for both jobs and growth.
