Contract market cools again in September as employers freeze hiring before the Budget

Temporary billings fell faster than the month before and candidate numbers surged, as the latest KPMG and REC Report on Jobs found firms holding back ahead of the 26 November Budget.

The market for temporary and contract staff in the UK deteriorated again in September, according to the KPMG and REC UK Report on Jobs published on 10 October 2025, with recruiters pointing to employers who are holding off hiring decisions until they know what is in the Autumn Budget. Compiled by S&P Global from a panel of around 400 UK recruitment and employment consultancies, the survey recorded temporary billings falling at a solid pace that was quicker than in August, a signal to IT contractors that new assignments remain thin on the ground and that more people are chasing each one.

Permanent falls ease, temp billings drop faster

The headline finding was a mixed one. Permanent staff appointments continued to fall, but the reduction was the softest recorded for a year, suggesting the steepest phase of the downturn in company hiring may have passed. The temporary market moved the other way, with billings dropping faster than the month before. Demand for staff, measured by vacancies, kept falling markedly, with the rate of contraction easing only slightly from August's six-month record.

Neil Carberry, chief executive of the Recruitment and Employment Confederation, said the numbers pointed to a floor forming in one part of the market. "Recruiters have been reporting a trend towards stabilisation in the permanent job market since the summer, and today's data back that up for September," he said.

Pay growth stalls as candidates pile up

For those still bidding for work, the report made uncomfortable reading on rates. Starting salaries for permanent staff rose only negligibly, the weakest growth since the current run of pay inflation began just over four and a half years ago, while temporary pay increased only slightly. The supply of available workers climbed sharply across both permanent and temporary categories, with agencies linking the jump to redundancies, although the pace of that expansion eased from August's post-pandemic record. Retail and hotel and catering saw the steepest drops in permanent demand.

Jon Holt, group chief executive and UK senior partner at KPMG, tied the caution directly to the fiscal event looming in November. "With very little positive news out there on the economy in recent months, and lots of speculation about the Budget, it is understandable that employers are cautious with their hiring," he said.

What it means for contractors

The Report on Jobs is one of the most closely watched gauges of temporary and contract demand, and its September reading describes a market that is harder for day-rate professionals to work in. Falling billings alongside a rising pool of available candidates means more contractors competing for fewer engagements, and little upward pressure on rates. With the Budget set for 26 November, many clients appear to be deferring commitments rather than starting new project work, a pattern that tends to hit fixed-term and outside-IR35 roles first.

Holt cautioned that the picture remained fragile despite pockets of steadier data. "The jobs market has not yet turned a corner and remains tough, but we saw stabilisation in some of the numbers last month," he said. For contractors, whether that steadier tone reaches the temporary market is likely to depend on what the Chancellor announces at the end of November.