Hiring Slowdown Shows Signs of Easing as Permanent Placements Near Stabilisation

Why It Matters

The data signals a tentative rebound in the UK labour market, offering employers a broader talent pool while tempering wage pressures. Sustained improvement could restore hiring confidence and support broader economic recovery.

Key Takeaways

• Permanent hires fell marginally, weakest decline since March 2023
• Candidate pool grew sharply, driven by redundancies
• Vacancy index rose to 45.8, still below growth threshold
• Engineering demand up; retail and hospitality vacancies fell
• Pay growth slowed, specialist skill wages still rising

Pulse Analysis

The latest KPMG‑REC UK Jobs Report shows the UK labour market at a crossroads. After more than two years of declining permanent placements, February’s figures reveal the smallest month‑on‑month drop since early 2023, suggesting that the hiring slowdown is losing momentum. While overall vacancy numbers remain below pre‑pandemic levels, the vacancy index’s modest rise to 45.8 indicates a deceleration in contraction, hinting that employers may soon feel more comfortable reopening recruitment pipelines.

A notable shift accompanies this tentative recovery: the pool of active job seekers expanded sharply, driven largely by recent redundancies and cost‑cutting measures across sectors. Recruiters report three consecutive years of rising permanent candidate numbers, providing firms with a larger talent reservoir and potentially easing the competitive pressure on specialist wages. Although starting salaries and temporary pay rates continue to climb, the pace of wage growth has softened, with permanent salary increases hitting their weakest rate since October. This balance between supply and demand could help temper inflationary wage pressures while still rewarding niche skill sets.

Regional and sectoral nuances further shape the outlook. London and the South saw a dip in permanent placements, whereas the North experienced modest gains, reflecting divergent economic dynamics across the country. Engineering remains the sole sector with rising permanent demand, while retail and hospitality continue to shed vacancies. As business confidence remains tentative amid global uncertainties, the labour market’s near‑term trajectory will depend on whether these early signs of stabilisation translate into sustained hiring momentum and broader economic resilience.