Why UK employers are choosing temporary staffing in an uncertain market

The UK jobs market sent a fairly clear signal in April. Permanent placements fell at their fastest rate since January, while temporary billings went up for the first time in three months. When the market is this cautious, that split is worth paying attention to because it shows  how employers are actually behaving rather than how they say they feel.

This post looks at what the latest data shows, what is driving the uncertainty behind it, and what that means if you are planning headcount for the rest of 2026.

What the latest UK labour market data shows

The clearest read on UK hiring is the monthly KPMG and REC, UK Report on Jobs, compiled by S&P Global from responses provided by around 400 recruitment consultancies. Its latest release found that greater uncertainty and rising business costs drove a faster fall in permanent appointments in April, while temp billings rose slightly. The temporary sector posted its strongest growth in around two and a half years.

The rate of decline in overall demand for staff also continued to ease, hitting its softest level in nearly a year. So this is not a market in freefall. It is a market where employers are holding off on long-term commitments while keeping operations running through flexible labour.

The official figures back this up. The Office for National Statistics reported that UK vacancies fell to around 705,000 in the three months to April 2026, the lowest level since early 2021, with roughly 2.5 unemployed people for every open role. Pay growth has slowed to about 3.4% for regular earnings. These numbers all point in the same direction: confidence is fragile, hiring is being deferred, and flexible labour is filling the gap.

What is actually driving the uncertainty

The shift in hiring behaviour traces back to a  geopolitical shock. In late February 2026, military strikes against Iran prompted the closure of the Strait of Hormuz, the route for roughly a fifth of global oil and gas trade, and shipping through it largely stopped. A ceasefire was announced in April, but the disruption had already fed into the UK economy.

The most direct effect was on prices. UK CPI inflation rose to 3.3% in March 2026, up from 3.0% in February, with higher motor fuel costs the biggest single contributor and food inflation also climbing. Some economists have warned inflation could climb further still over the course of the year. With energy and input costs rising, the Bank of England held its main interest rate at 3.75% in March rather than making the cut markets had been expecting, and financial markets stopped pricing in rate cuts for 2026. That has pushed up borrowing costs, including for business lending and mortgages.

Growth expectations took a hit too. In April the International Monetary Fund cut its UK GDP growth forecast for 2026 to 0.8%, down from 1.3% in January, the sharpest downward revision of any G7 economy, with the UK assessed as more exposed to energy price shocks than its peers. Business sentiment reflects it: the CBI’s Industrial Trends Survey in April found more manufacturers expecting output to fall over the next three months than to rise, and the British Chambers of Commerce described an economy operating below potential with limited resilience to absorb further shocks.

For an employer, that combination is the whole story in one line. Higher costs, higher borrowing rates, weaker growth and very little headroom if something else goes wrong. In that environment, committing to fixed permanent headcount is a harder decision to defend, which is exactly what the hiring data is showing.

Why employers are choosing flexible staffing

When the outlook is this uncertain, a permanent hire is a fixed bet. Flexible staffing is a way of staying resourced without locking in cost, and that is the logic showing up in the numbers.

Borrowing costs, inflation and supply-chain disruption all make fixed headcount harder to justify. Temporary staffing turns a fixed cost into a variable one that moves with actual demand. At the same time, businesses still need to deliver on growth plans, and flexible labour lets them resource that work now without carrying the long-term exposure if conditions turn.

There is also a shift in how leadership thinks about it. As KPMG noted in the latest report, the rise in temporary recruitment points to chief executives taking a more flexible approach to workforce planning, and that flexibility may be part of what helps the labour market avoid a sharper downturn while still supporting growth. Flexible labour is moving from something businesses reach for in an emergency to something they plan around on purpose.

Where the pressure is concentrated by sector

The strain is not spread evenly, which matters if you are planning across more than one site or sector.

Hospitality and retail saw the steepest falls in permanent vacancies in April. Both sectors run on demand that swings with the season, the day and the event, so the ability to flex labour up and down by the shift is closer to an operating model than a contingency.

Industrial and blue-collar roles showed stronger demand for short-term staff, alongside nursing, medical and care. Where output targets and shift coverage cannot slip, contingent labour is increasingly doing the work that permanent hiring used to.

Engineering was the only category to register rising permanent demand,  underlining how differently skills-short specialist areas behave from volume-driven ones.

If your operation spans more than one of these, a single blanket workforce plan is unlikely to hold. The risk looks different sector by sector, and so does the right response.

The legislation angle employers cannot ignore

There is a second force reshaping flexible staffing in the UK, and it is legal rather than economic.

The Employment Rights Act received Royal Assent in December 2025, with a staged rollout running across 2026 and 2027. From January 2026, zero-hours workers can no longer be restricted from taking other work. Further out, employers will face a duty to offer guaranteed-hours contracts to qualifying workers based on the hours they regularly work over a reference period that is expected to be around 12 weeks. Agency workers are in scope.

The direction of travel is hard to miss. Informal, one-sided flexibility is being phased out, and flexible staffing that is properly structured, transparent and compliant is being phased in. Employers still running ad-hoc casual arrangements are carrying a compliance risk they may not have fully priced in. Those who redesign their flexible models around structure and transparency will be in a stronger position, especially in a tighter labour market. Using more temporary staff is no longer the whole answer. How you run a flexible workforce, with what visibility and what compliance posture, is the part that matters now.

How to plan for it rather than react to it

The employers who handle the rest of 2026 well will not be the ones who simply hire more temporary staff. They will be the ones who plan their flexible workforce as carefully as their permanent one.

A sensible place to start is mapping where demand genuinely flexes by site and by role, so you know where contingent labour belongs and where stable headcount still makes sense. From there it is worth pressure-testing the downside, modelling what happens to cost and coverage if demand drops 15 to 20%, and treating the Employment Rights Act changes as a design input now rather than a problem to deal with later. Finally, the partners you work with should give you visibility and control over the workforce, not just people on shift.

The market is pushing employers towards flexibility. The legislation is pushing them to be structured about it. The businesses that plan for both, rather than reacting to each in turn, are the ones that will come through the year in better shape.

Sources: KPMG and REC, UK Report on Jobs (S&P Global), May 2026 release; Office for National Statistics, Vacancies and jobs in the UK and Labour market overview, May 2026; House of Commons Library economic updates on the Middle East conflict and UK economy and supply chains, 2026; Employment Rights Act 2025 staged implementation guidance. Figures cited reflect the latest available data at time of publication.