Rising employment costs and weak business confidence are pushing UK employers to rely more heavily on temporary workers while scaling back permanent hiring, according to new survey data.
The trend reflects a growing preference for flexible staffing arrangements as businesses navigate economic uncertainty, tighter budgets, and a cautious growth outlook.
Permanent hiring slows while temporary demand strengthens
While permanent recruitment weakened significantly in May, demand for temporary staff moved in the opposite direction, reaching its strongest level in more than three years. This suggests that businesses are responding to economic uncertainty by favoring short-term staffing arrangements over permanent hires, giving them greater flexibility to manage costs and changing demand.
Data from a monthly survey released on Monday, June 8, by KPMG and the Recruitment & Employment Confederation (REC) showed permanent placements falling from 47.5 in April to 44.1 in May, signalling a sharper decline in hiring activity. Temporary billings, meanwhile, rose from 50.4 to 52.2, their strongest reading since April 2023.
“May’s figures suggest that the South's jobs market is diverging. Employers are still reluctant to commit to permanent hiring, with tighter budgets and hiring freezes continuing to weigh on longer-term recruitment decisions. At the same time, the sharpest rise in temp billings for three years shows that businesses still need access to skills and capacity. They are just choosing to do so in a more flexible way,” said David Williams, a Bristol Office Senior Partner at KPMG UK.
Damilare Odedina
What’s driving the shift in UK hiring strategies?
The latest survey points to weak business confidence, hiring freezes, tighter recruitment budgets, and concerns about the economic outlook as key factors behind the slowdown in permanent hiring.
Many businesses have spent the past two years focusing on cost control and efficiency amid slower economic growth and persistent uncertainty. Under those conditions, temporary hiring offers employers a way to access talent and meet immediate business needs without taking on the longer-term financial commitments associated with permanent staff.
Neil Carberry, chief executive of the REC, said the shift reflected “a lack of confidence” among employers, making them wary of committing to permanent hires even when new projects required additional staff.
“The jobs market continues to be restrained by uncertainty, with firms hesitant to commit to permanent hiring,” Carberry said, adding that recent geopolitical tensions had further complicated what had been an emerging recovery in business confidence.
Beyond economic uncertainty and rising employment costs, employers are also preparing for changes to workplace regulations.
The UK government is pushing ahead with reforms aimed at strengthening workers' rights and improving job security for both permanent and casual staff. Retailers and other employers have warned that some of the proposed measures, including requirements around guaranteed working hours, could increase labour costs and make businesses more cautious about hiring.
According to the Financial Times, retailers argue that the reforms could reduce their ability to rely on flexible staffing arrangements if doing so would create obligations resembling permanent employment contracts.
While artificial intelligence continues to reshape parts of the labour market, the latest recruitment data points more clearly to employer caution, rising costs, and economic uncertainty as the primary factors behind the slowdown in permanent hiring.
As companies increasingly focus on efficiency, automation, and operating with leaner workforces, questions about the long-term impact of AI on employment are likely to remain part of the broader conversation.
David Adubiina
