Permanent hiring gains momentum, but the recovery remains uneven
The UK recruitment market is showing further signs of life – but this month’s data is a reminder that recovery rarely happens in a straight line.
In September’s snapshot, we highlighted a significant milestone: permanent placements had returned to growth for the first time in nearly four years, while temporary billings continued to rise. This month, that progress has continued.
Permanent placements increased for a second consecutive month, reaching their strongest rate of growth in four years. Temporary billings also rose again, although the pace slowed to a five-month low.
There’s another encouraging development beneath the headline figures: private-sector demand for permanent staff increased for the first time in more than two years. But the wider picture remains mixed. Overall vacancies are still falling, UK services businesses continue to reduce headcount, and construction remains under pressure.
Our October UK Recruitment Market Snapshot brings together the latest findings from four major reports – the KPMG & REC UK Report on Jobs, S&P Global UK Services PMI®, S&P Global UK Construction PMI® and J.P. Morgan Global Manufacturing PMI® – to give recruitment agencies one straightforward view of what’s happening across the market.
The message this month? The recovery is continuing, but recruiters need to know where demand is actually strengthening.
MARKET SNAPSHOT: 5 Key Numbers
50.9 – Permanent Placements Index
Permanent placements increased for the second consecutive month, with growth reaching its strongest level in four years.
50.9 – Temporary Billings Index
Temp billings increased for the sixth consecutive month, although growth slowed to its weakest pace in five months.
48.5 – Total Vacancies Index
Overall vacancies continued to decline, but at the slowest rate in more than two years.
52.1 – UK Services PMI
UK services activity expanded for a third consecutive month, although employment continued to fall.
46.1 – UK Construction PMI
Construction output remained in contraction, but the decline was the slowest since January.
The figures reflect September 2026 survey data, published in October. Index readings above 50 generally indicate growth, while readings below 50 indicate contraction.
Permanent recruitment: two months of growth is a meaningful shift
After a prolonged period of declining permanent placements, recruiters now have a second month of positive data to work with.
The latest KPMG & REC UK Report on Jobs recorded a Permanent Placements Index of 50.9 in September, up from 50.5 in August.
It’s still modest growth, but the direction matters.
Recruiters reported that some employers were hiring to support rising activity levels, business expansion and improved confidence.
The regional picture also shows where momentum is developing:
- North of England: 53.6 – the strongest growth in permanent placements.
- Midlands: 52.1 – another positive month.
- London: 50.4 – marginal growth.
- South of England: 47.9 – permanent placements continued to decline.
The key difference from earlier in the year is that permanent recruitment is no longer simply declining at a slower rate.
Placements are now increasing, albeit gradually.
For perm recruiters, that’s encouraging. But with growth still marginal, consistent client engagement and a strong understanding of which sectors are hiring remain essential.
Temporary recruitment: still growing, but momentum has eased
Temporary recruitment continues to perform positively, although September’s figures suggest the pace of growth is becoming more measured.
The Temporary Billings Index stood at 50.9, down from 52.4 in August.
That marks six consecutive months of rising billings, but the latest increase was the weakest since the current growth period began in April.
Recruiters reported a mixture of new projects and demand for short-term staff, alongside some employers opting for permanent hires instead.
Regional differences were particularly noticeable.
The North of England remained strong at 55.4, while the Midlands recorded 53.8. The South posted a smaller increase at 51.3.
London, however, fell to 44.4, ending four consecutive months of growth. This is an important distinction for agencies.
Temp recruitment is still growing, but the opportunity is not evenly distributed.
Recruiters need to look beyond national figures and pay close attention to the sectors, regions and clients where flexible hiring continues to create demand.
Vacancy demand: the private sector offers an encouraging signal
One of the most interesting findings this month sits within the vacancy data.
Overall demand for workers is still declining, but the rate of reduction is now the slowest since August 2024.
The Total Vacancies Index improved from 47.0 in August to 48.5 in September.
Both permanent and temporary vacancies declined slightly on a seasonally adjusted basis. However, the private-sector breakdown tells a more encouraging story.
Private-sector permanent vacancies increased for the first time in over two years, with the relevant index reaching 52.9. Private-sector temporary demand also remained positive at 52.4.
Public-sector vacancies, by contrast, continued to fall sharply.
This suggests that while the overall recruitment market hasn’t fully recovered, some private businesses are beginning to invest in hiring again.
For agencies, the opportunity may be less about waiting for a broad market rebound and more about identifying businesses that are already moving.
Which recruitment sectors are showing the most promise?
The latest data shows a clear difference between sectors where recruitment demand is improving and those still under pressure.
For permanent recruitment, five of the ten monitored job categories recorded rising vacancies.
IT & Computing and Engineering led the growth, followed by Accounting & Financial, Construction and Blue Collar roles.Temporary vacancies showed a narrower spread of growth.
Only three sectors recorded increases:
- Blue Collar
- IT & Computing
- Nursing, Medical & Care
Engineering temp vacancies declined modestly, while Retail recorded a particularly sharp fall.
This matters for recruiters considering where to focus business development.
Agencies operating in technology, engineering, blue-collar and specialist care markets may find more opportunities than those relying on general hiring demand.
It also reinforces the value of specialisation. A strong understanding of a particular market – and the employers within it – could be especially valuable while recovery remains uneven.
Candidate availability: still high, but the balance may be changing
Recruiters continue to have access to a larger pool of available candidates.
The Staff Availability Index stood at 57.2 in September, down from 60.6 in August.
Candidate supply is still increasing, but at its slowest rate in three years.
The increase in permanent candidate availability eased particularly noticeably, while temporary candidate numbers continued to grow.
At the same time, starting salary and temporary wage inflation both softened.
For recruitment agencies, this creates an interesting environment.
There may still be opportunities to find skilled candidates who have been harder to reach in tighter labour markets. But as permanent placements begin to grow, competition for specialist talent could become more relevant again.
The opportunity is to use this period to strengthen candidate relationships, build talent pools and demonstrate the value of a well-managed recruitment process.
UK Services PMI: activity is growing, but employment is still falling
The UK services sector continued to expand in September.
The S&P Global UK Services PMI Business Activity Index registered 52.1, compared with 52.5 in August. That marks a third consecutive month of growth.
New business also increased, although only marginally, while technology services remained an area of particular strength.
There is an important distinction, however, between increased business activity and increased hiring.
Employment across the services sector declined for the 24th consecutive month, although the latest reduction was relatively modest.
Businesses reported pressure from payroll costs, efforts to improve productivity and greater use of technology, including AI. In other words, more work doesn’t automatically mean more jobs.
The sector’s cost pressures also intensified, with higher fuel, energy, transport and employment costs weighing on margins.
For recruitment agencies, this reinforces the need to understand how clients plan to deliver their growing workloads.
Some may recruit permanently. Others may prefer temporary workers, contractors or specialist support for individual projects.
And some may initially try to increase output without expanding headcount.
The strongest opportunities may come from understanding which of those approaches each client is taking.
UK Construction PMI: output improves, but hiring conditions deteriorate
Construction remains one of the clearest examples of why this recovery needs to be viewed carefully.
The UK Construction PMI rose from 44.3 in August to 46.1 in September.
That represents the slowest decline in construction output since January.
All three major areas – commercial construction, housebuilding and civil engineering – reported softer falls in activity.
Commercial construction was the most resilient, with an index of 48.5. Housebuilding remained particularly weak at 40.7. However, the improvement in output wasn’t matched by stronger hiring.
New orders declined at their fastest pace for three months, while construction employment fell at its quickest rate for five months.
Subcontractor usage also returned to decline.
Rising borrowing costs, project delays, weaker demand and uncertainty continue to weigh on the sector.
For construction recruiters, the message is therefore mixed.
There may be opportunities linked to specific projects, commercial activity and specialist skills. But the broader market remains challenging, and agencies should be cautious about interpreting slower contraction as a return to growth.
Manufacturing: a stronger global picture, with positive signs for UK employment
Manufacturing provides a more encouraging international backdrop this month.
The J.P. Morgan Global Manufacturing PMI rose to 53.0 in September, its highest level in 55 months.
Global output, new orders and employment all strengthened, although cost pressures also increased.
These are worldwide figures, rather than measures of UK manufacturing demand, so they shouldn’t be treated as evidence of a UK-wide recruitment boom.
There is, however, a UK-specific positive signal within the report: the UK was among the countries reporting increased manufacturing employment.
That provides an encouraging contrast to continued job cuts in services and construction.
For agencies working with manufacturing and engineering employers, it is another reason to stay close to clients’ production plans, specialist skills requirements and potential capacity constraints.
What does this mean for recruitment agencies? October’s data builds on the improvement we highlighted in September. But it also introduces an important note of caution.
Permanent placements have now increased for two months. Temporary billings have grown for six. Private-sector permanent vacancies are rising again, and the decline in overall vacancies is easing. At the same time, temp billings growth has slowed, services businesses are still reducing headcount and construction remains under pressure.
So what should agencies take from this?
The market is improving, but opportunity is becoming more selective.
For established temp and contract recruiters, that means focusing on sectors and clients where demand is genuinely strengthening rather than assuming all markets are recovering at the same pace.
For perm-led agencies, it means recognising that permanent hiring is returning without losing sight of the continued demand for flexible staffing.
And for perm-only agencies, this could be a particularly useful time to review the services they offer.
If your existing clients are expanding, starting new projects or struggling to manage capacity, are they looking exclusively for permanent employees? Or could temporary and contract recruitment help them respond more flexibly?
Offering both doesn’t have to mean changing your entire business model. It could mean adding a complementary service that helps you retain clients, increase the value of existing relationships and respond to a wider range of hiring requirements.
Of course, moving into temporary recruitment brings additional responsibilities – particularly payroll, credit control and funding workers before clients settle their invoices.
That’s where the right recruitment funding and invoice finance arrangements can make a difference.
“What’s encouraging about this month’s figures is that we’re now seeing more than one positive month for permanent recruitment. That’s a meaningful change after such a long downturn.
But I think the bigger lesson for agencies is that the recovery isn’t happening evenly. Temp is still growing, perm is starting to improve, and some sectors are moving much faster than others.
For recruitment businesses, it’s about being close enough to your clients to understand how their hiring needs are changing – and having the flexibility to support them, whether that’s permanent, temporary or contract.” Ashley Lyas, Director, QUBA Solutions
The QUBA view: flexibility still matters
Throughout this year’s market snapshots, one theme has remained consistent: employers are being more considered about how they hire.
Earlier in the year, temporary recruitment was doing much of the heavy lifting while permanent placements continued to decline.
Now, permanent recruitment is beginning to recover too.
That doesn’t make temporary recruitment any less relevant.
It means agencies may increasingly benefit from being able to offer clients more than one solution.
For recruitment businesses looking to grow, the challenge is making sure operational demands don’t become a barrier to taking on new work.
Invoice funding, payroll support and effective credit control can all play an important role when an agency starts supplying temporary or contract workers.
And when comparing invoice factoring companies or other invoice financing options, it’s worth looking beyond the funding itself to the level of recruitment-specific support available.
The market may be moving in a more positive direction, but agencies still need the right foundations to take advantage of it.
Considering adding temp or contract recruitment?
If your clients are beginning to ask for temporary or contract workers, but funding, payroll, credit control or back-office administration is holding you back, QUBA can help.
We provide recruitment agencies with the funding and operational support needed to place workers, manage cash flow and grow without waiting for clients to pay.
Find out more or talk to QUBA about making the move into temporary recruitment.
