Strong Increase in Temporary Recruitment Recorded in May

Why It Matters

The shift toward short‑term contracts signals businesses prioritising flexibility amid cost pressures, reshaping hiring strategies and dampening overall wage growth. Policymakers must consider the balance between flexible work and worker protections as the labour market tightens.

Key Takeaways

• Temporary staffing billings rose fastest in over three years in May.
• Permanent hires fell at quickest pace since July 2025, 44‑month decline.
• UK vacancies dropped 7.1% to 705,000, lowest in five years.
• Healthcare was only sector with rising permanent recruitment.
• Temporary worker supply grew fastest in six months, expanding talent pool.

Pulse Analysis

The REC/KPMG May report underscores a turning point in the UK labour market. Permanent placements have been shrinking for 44 consecutive months, the longest stretch on record, with a 7.1% annual dip in vacancies to 705,000 – a five‑year low. This contraction reflects lingering uncertainty from higher energy costs, the Gulf crisis, and new employment regulations, prompting firms to postpone or cancel long‑term hiring plans. By contrast, temporary staffing billings surged, delivering the quickest growth in more than three years and highlighting a strategic pivot toward flexible labour.

Several forces are fueling the temporary boom. Companies face tighter budgets and volatile demand, making short‑term contracts an attractive hedge against over‑staffing. Simultaneously, a swelling pool of job seekers – bolstered by recent layoffs and heightened insecurity – has expanded the supply of contract workers, especially in regions like southern England. The rapid increase in temporary wages, now in a six‑month growth streak, indicates employers are willing to pay a premium for agility, yet overall pay pressure remains muted as the broader hiring slowdown curtails competition for talent.

The implications are two‑fold. For businesses, the reliance on contingent labour offers cost control but may erode institutional knowledge and employee loyalty over time. For policymakers, the surge raises questions about the adequacy of zero‑hours reforms and the need to safeguard a growing gig‑type workforce. As permanent hiring stays subdued, the temporary sector will likely continue to act as a buffer, keeping the economy moving while the macro environment remains uncertain.