KPMG report shows UK firms favor temp hires as permanent jobs fall

UK employers are cutting back on permanent hiring just as demand for temporary labour strengthens, a split that has immediate consequences for KPMG teams selling advice, delivery support and workforce transformation into the UK market. The June 2026 KPMG and REC UK Report on Jobs showed permanent placements falling at the fastest pace in ten months, while temporary billings rose at the strongest rate in more than three years.

For consultants, auditors and workforce specialists inside KPMG, that mix points to clients who still need work done but are delaying long-term commitments. It suggests more project-based resourcing, more contractor use and more pressure to offer flexible support in areas such as transaction services, compliance, interim leadership and managed services. When permanent headcount softens but temp demand rises, firms often want help filling gaps without locking in fixed payroll costs.

The report, compiled by S&P Global from responses from around 400 UK recruitment and employment consultancies, also showed candidate availability rising sharply. Redundancies and weaker demand for workers pushed more people into the market, while pay growth for both starting salaries and temp wages remained modest and below historical averages. That means more supply is chasing fewer permanent roles, but not enough wage pressure to suggest a broad-based hiring rebound.

KPMG and REC linked the weaker outlook to heightened uncertainty around business conditions, including the war in Iran and UK political turbulence. The REC said weak confidence and cost challenges continued to weigh on hiring activity in June, even as temporary vacancies fell at the slowest rate in 22 months. Permanent staff demand fell more quickly than temporary demand, a sign that employers are drawing a sharper line between roles they need to own and work they can rent.

The wider labour market was already loosening. The Office for National Statistics said UK vacancies in February to April 2026 were down 54,000, or 7.1%, from a year earlier. It also said there were 2.5 unemployed people per vacancy in January to March 2026, while payrolled employees in April 2026 were estimated at 30.2 million, down 210,000 year on year. For KPMG teams pitching into UK clients, that backdrop helps explain why hiring conversations are becoming more selective and more cost-conscious.

The recruitment market is also becoming more reliant on flexible work as a business model. The REC said recruitment contributed about £40bn to the UK economy in 2024-25, and roughly three-quarters of that value came from temporary and contract work. For KPMG, that is not just a market signal. It is a reminder that in a cautious UK economy, the fastest-growing opportunities may be the ones built around flexibility, not expansion.