As participants in the REC/KPMG UK Jobs panel, we’re pleased to share the latest insights from the May 2026 labour market data.
This month’s report highlights an increasingly cautious permanent recruitment market, whilst temporary and contract hiring continues to gain momentum. Rising employment costs, economic uncertainty and ongoing geopolitical challenges are influencing employer behaviour, resulting in many organisations favouring flexibility over long-term hiring commitments.
For HR professionals and business leaders, the latest data suggests that whilst recruitment activity remains active, the shape of hiring is continuing to evolve.
📉 Permanent Hiring Continues to Slow
The most significant development in May was a renewed deterioration in permanent hiring activity.
Across the UK, permanent placements fell at the fastest pace since July 2025, with recruiters widely reporting that organisations are delaying or pausing permanent recruitment decisions due to budget pressures and uncertainty around future business performance.
The latest report notes that this marks the 44th consecutive month of declining permanent placements, making it the longest period of contraction since the survey began in 1997.
Within the South of England, permanent hiring remained particularly subdued, with recruiters citing:
- Hiring freezes
• Reduced recruitment budgets
• Lower business confidence
• Ongoing economic uncertainty
For the fifth consecutive month, the South recorded a sharper decline in permanent placements than the UK average.
🚀 Temporary Hiring Provides a Bright Spot
In contrast, temporary recruitment showed significant improvement during May.
Nationally, temporary billings increased at the fastest rate seen in more than three years as employers increasingly turned to flexible workforce solutions rather than committing to permanent hires.
The South of England saw the strongest growth of all English regions, with temporary hiring activity reaching a three-year high. Recruiters reported that organisations still require skills and resource but are choosing to engage talent through shorter-term arrangements while waiting for greater economic certainty.
This is a trend we are also seeing within the HR market, with organisations more willing to consider:
- Fixed-term contracts
• Interim HR support
• Project-based resource
• Specialist short-term expertise
rather than creating additional permanent headcount.
📊 Demand for Staff Remains Soft
Overall vacancy levels continued to decline during May, although the picture varies significantly between permanent and temporary recruitment.
Permanent vacancies fell at the fastest pace seen for four months, whilst temporary vacancies moved closer towards stabilisation and recorded their weakest decline in almost two years.
Official ONS data also showed UK vacancies falling to approximately 705,000, the lowest level recorded in five years and, outside of the pandemic period, the lowest for more than a decade.
Interestingly, London presented a more positive picture, with both permanent and temporary vacancies increasing during May. Permanent vacancies rose at their fastest pace in over three years, while temporary vacancies returned to growth for the first time since 2024.
👥 Candidate Availability Continues to Increase
The supply of candidates continued to rise sharply throughout May.
Recruiters reported that redundancies, organisational restructuring, fewer available vacancies and concerns around job security all contributed to increasing candidate numbers.
The South of England recorded its strongest increase in permanent candidate availability so far in 2026, whilst London also saw marked growth in both permanent and temporary talent pools.
For employers, this means greater access to talent than at any point over the past few years.
However, increased availability does not necessarily remove recruitment challenges. Organisations continue to seek highly specific skills and experience, particularly for specialist and leadership positions.
💷 Pay Growth Continues to Ease
The combination of increased candidate supply, softer hiring demand and tighter recruitment budgets is continuing to moderate salary growth.
Both permanent starting salaries and temporary pay rates increased during May, but only modestly and at levels well below historic averages.
For employers, this may provide some relief following several years of significant wage inflation. However, businesses should remain mindful that candidates with specialist or highly sought-after skills continue to command strong packages.
💡 What This Means for Employers and HR Leaders
The May data reinforces a trend that has been building throughout 2026:
- Permanent hiring confidence remains fragile
• Temporary and interim recruitment is strengthening
• Candidate availability continues to increase
• Salary growth is moderating
• Employers remain cautious but are still hiring where business needs require it
For HR leaders, this remains a market where flexibility, workforce planning and retention strategies are becoming increasingly important.
Whilst confidence has not yet fully returned, organisations that remain proactive in securing key talent are likely to be well positioned when hiring activity begins to recover more broadly.
Sources:
• KPMG and REC UK Report on Jobs – May 2026
• KPMG and REC London Report on Jobs – May 2026
• KPMG and REC South of England Report on Jobs – May 2026