The UK recruitment market is moving again, led by temp and contract hiring
The UK recruitment market is beginning to improve, although the recovery is uneven. Temp and contract recruitment has the strongest momentum, while permanent placements are also starting to move in the right direction. At the same time, overall UK vacancies remain subdued.
Those trends are not as contradictory as they first appear. Employers are becoming more willing to hire where there is a clear need, while remaining cautious about making broader or longer term commitments to headcount. For recruitment agencies, that means how employers are choosing to hire is becoming just as important as the overall number of vacancies in the market.
Is the UK recruitment market recovering?
There are positive signs, but the data points to an uneven recovery rather than a widespread return to strong hiring.
Firefish's August Job Flow Index found total placements were 10% higher than in August 2025. Temp and contract jobs created were up 14% year on year, with temp and contract accounting for 87% of all placements.
External market data points in the same direction. The latest KPMG and REC UK Report on Jobs found temporary billings increased for a fifth consecutive month in August, while permanent staff appointments rose for the first time since September 2022.
Wider demand is still under pressure, though. ONS data shows an estimated 707,000 UK vacancies in May to July 2026, down 2.7% from the same period a year earlier.
Taken together, the figures show hiring activity beginning to strengthen before the wider vacancy market has recovered. Employers may not be opening significantly more roles across the board yet, but more of the hiring that is taking place is resulting in placements.
Why can placements rise while vacancies are still falling?
Placements and vacancies measure different parts of the hiring market, so they can move in different directions.
Vacancy figures indicate how many roles employers are looking to fill. Placements tell us where recruitment activity has resulted in somebody actually starting a role. An employer can therefore keep tight control over the number of new vacancies it opens while continuing to recruit for positions that are commercially important.
A business might restrict permanent headcount but still bring in temporary workers when demand increases, or use contractors for specific projects and specialist skills. In that kind of market, recruitment activity can improve before the change becomes visible in broader vacancy numbers.
That helps explain why flexible hiring is currently showing more momentum than the market as a whole.
Why is temp and contract recruitment leading the improvement?
Temp and contract hiring gives employers more control over when they add capacity and how long they need it for.
That flexibility has become more relevant as employment costs have risen and businesses remain cautious about future demand. Employer National Insurance contributions increased from 13.8% to 15% in April 2025, while the earnings threshold at which employers start paying contributions fell from £9,100 to £5,000. In April 2026, the National Living Wage increased by a further 4.1% to £12.71 an hour for workers aged 21 and over.
For employers in labour intensive sectors, those changes have increased the cost of expanding their workforce. Temporary workers and contractors do not remove those costs, which still need to be reflected in the overall cost of labour. What flexible hiring can provide is more control over when additional capacity is brought in and how long that commitment lasts.
The need for people does not disappear simply because employers are being more careful with permanent headcount. Projects still need completing, production levels need maintaining and skills gaps still need covering. Businesses still need additional capacity when demand requires it.
The difference is increasingly in how they choose to meet that need.
KPMG and REC reported that stronger temporary billings in August were partly driven by employers favouring short term staff and increased contract work. Temporary billings have now grown for five consecutive months, making this more than a single month improvement.
For recruiters, that consistency matters. It shows that employers are continuing to hire when there is a clear business requirement, even while they remain cautious about longer term commitments.
What does the improvement in permanent placements tell us?
The return to growth in permanent placements is an encouraging sign that employer confidence could be broadening, although it is too early to call it a sustained recovery.
KPMG and REC recorded the first increase in permanent appointments for almost four years in August. Firefish data also showed permanent placements 10% ahead of August 2025, despite agencies taking on 6% fewer permanent jobs year on year.
Until now, the improvement had been much clearer in temporary recruitment. In July, permanent placements had only just stabilised after a 45 month period of decline, while temporary billings were already rising for a fourth consecutive month.
Seeing permanent placements move in a positive direction alongside temp and contract recruitment gives the market another encouraging signal. Employers appear more willing to commit to permanent hires, but where the requirement is strong enough.
There is still good reason to be cautious. Overall vacancies continue to fall and candidate availability remains high. One positive month for permanent recruitment is encouraging, but it will take several months of similar movement before it can reasonably be described as a sustained recovery.
What should recruitment agencies take from these signals?
Recruitment does not need to return to full growth before opportunities begin to emerge for agencies.
Temp and contract recruitment is already showing sustained momentum, while permanent placements are beginning to improve. At the same time, the wider vacancy market remains cautious and rising employment costs are giving businesses another reason to scrutinise permanent headcount decisions.
That makes headline vacancy numbers only part of the picture. Agencies also need to pay attention to where employers are continuing to spend, which types of hiring they are choosing and where placements are already being made.
The market is still selective. Employers remain cost conscious and careful about committing to headcount. But hiring has not stopped, and flexible staffing is currently providing the clearest evidence of where demand is returning.
For recruitment agencies, the commercial question now becomes more specific: where is that demand strongest, and where is it most likely to turn into placements?
Explore the latest Firefish Job Flow Index for the full breakdown of jobs, placements and candidate activity across the UK recruitment market.
