Temporary and Contract Hiring Leads the UK Labour Market Recovery
Temporary billings grew at the fastest rate since April 2023 as employers used flexible workers to advance shorter projects without committing to permanent expansion.
Temporary and contract work delivered the strongest sign of improvement in the UK recruitment market during July, although the recovery remained uneven for technology specialists.
The KPMG and Recruitment and Employment Confederation Report on Jobs found that temporary billings increased in June at the fastest rate for more than three years. The pace of growth was the strongest since April 2023, while permanent placements continued to fall, although only marginally and at the slowest rate in three months.
The report was compiled by S&P Global from questionnaires sent to a panel of around 400 recruitment and employment consultancies. The data were collected between 11 and 24 June and published on 8 July.
Employers chose flexibility in an uncertain market
Recruiters said economic and geopolitical uncertainty had encouraged clients to use temporary workers for shorter projects rather than make longer term hiring commitments.
KPMG UK vice chair Lisa Fernihough said recent months had been defined by “the pivot to temporary work”. She added that flexible hiring allowed chief executives to progress projects and investment while limiting long term commitments.
REC chief executive Neil Carberry described the figures as hopeful and said: “Temporary and contract work once again leads the way.”
The trend was visible across England. Temporary billings increased in all four regions covered by the survey, with the strongest expansion in the South. Starting pay also improved for both permanent and temporary workers, recording the strongest growth since January, although increases remained below the long term survey average.
The recovery was not universal
The headline rise in billings did not mean that every contractor market had returned to growth. Total demand for staff fell at the quickest rate since January, mainly because of a steeper decline in permanent vacancies. Demand for short term staff also decreased slightly, at a rate little changed from May.
Candidate availability continued to rise sharply as redundancies and weak hiring added people to the market. The increase was the smallest for four months, but it still indicated that contractors could face substantial competition for new assignments.
Sector results were mixed. Temporary vacancies rose sharply in blue collar work and solidly in engineering, while eight of the ten categories monitored by the report recorded lower demand. Retail, nursing, medical and care, and executive and professional work registered the fastest reductions.
For IT contractors, that distinction was essential. The survey measured billings across the whole temporary labour market and did not establish a broad technology boom. It showed that organisations were becoming more willing to buy flexible capacity, creating a better environment for project based technology work if digital investment returned.
What could turn improvement into assignments
The preference for flexibility should favour contractors when clients have defined work that cannot wait for permanent headcount approval. Cybersecurity remediation, cloud migration, data governance, artificial intelligence implementation and regulatory technology programmes all fit that pattern when they are funded and time limited.
However, contractors still needed to demonstrate specialist value. Rising candidate supply gave clients more choice, and the March figures from SThree had already shown weakness in technology recruitment. Generalists were likely to remain under pressure even as spending resumed.
The July report therefore offered cautious encouragement rather than a declaration of recovery. Billings showed that companies were prepared to use temporary labour to move projects forward, and pay growth suggested that scarce capability could still command a premium. At the same time, falling vacancies and rising candidate numbers kept the balance of power with buyers.
For independent IT professionals, the opportunity lay in connecting a specific skill to an urgent project outcome. If confidence continued to improve, contract hiring was positioned to respond before permanent recruitment because it allowed organisations to add expertise without making a lasting commitment.