The South of England’s Labour Market: Signs of Recovery, but Caution Remains

There are signs that the UK’s recruitment market is beginning to turn a corner.

The latest KPMG and REC Report on Jobs points to a gradual improvement in hiring conditions as the second half of 2026 begins. Temporary recruitment continues to lead the recovery, while permanent hiring has finally stabilised after one of the longest periods of contraction on record. For businesses across the South of England, the picture is particularly interesting.

The data suggests that employers are becoming more comfortable bringing people into their organisations, but flexibility remains important as businesses continue to navigate economic uncertainty, higher employment costs and a changing political environment.

Temporary Recruitment Continues to Lead the Way

Temporary billings increased across the South of England for the fourth consecutive month in July. While the rate of growth was more modest than earlier in the summer, the continued increase is significant. Across the UK, temporary billings remained among the strongest seen since early 2023, reflecting a growing appetite for flexible workforce solutions.

For employers, temporary and contract hiring provides an opportunity to add capacity, progress projects and access specialist skills without making an immediate long-term commitment to permanent headcount. This is particularly relevant in an environment where confidence is improving, but businesses remain conscious of the potential for further economic or political volatility.

Rather than waiting for complete certainty, many businesses appear to be finding ways to move forward while retaining flexibility.

Permanent Recruitment May Be Starting to Turn a Corner

Perhaps the most encouraging development in the latest figures is the stabilisation of permanent recruitment across the UK. Permanent placements were unchanged in July, bringing a 45-month period of decline to an end. Although the improvement was driven primarily by London and the Midlands, the wider data suggests that the prolonged downturn in permanent hiring may finally be approaching its conclusion.

Employers remain selective when making permanent appointments, but the direction of travel is becoming more constructive. For businesses that have spent the last few years delaying recruitment decisions, this could prove an important signal.

Why Flexibility Still Matters

The current market highlights an important change in employer behaviour. Businesses are not necessarily choosing between "hiring" and "not hiring". Increasingly, they are considering how they hire.

Temporary, interim and project-based appointments can provide the flexibility to move forward with investment while allowing businesses to manage uncertainty around costs, demand and long-term headcount requirements. This is particularly relevant across finance functions, where businesses may need additional capability for systems implementations, transformation projects, acquisitions, reporting improvements or periods of change without necessarily wanting to add permanent headcount immediately.

For SMEs in particular, that flexibility can make the difference between delaying a project and getting it underway.

A More Balanced Candidate Market

Candidate availability remains elevated. Across the UK, the number of candidates available for roles continued to rise in July, although the rate of increase eased to its lowest level since February. Recruiters continued to link increased availability to redundancies and a lack of job opportunities.

At first glance, this could suggest that employers now have greater choice but the reality is more nuanced. A larger pool of candidates does not necessarily mean the right skills are easier to find. Businesses continue to face competition for individuals with the experience and specialist capabilities required to make an immediate impact.

This is reflected in pay data. Starting salary growth strengthened in July, while temporary wage growth reached its highest level for 26 months. The message for employers is therefore not simply that "there are more candidates available". It is that the market is becoming more balanced, but high-quality, specialist talent remains valuable.

What Does This Mean for Businesses in the South and Thames Valley?

For businesses across Hampshire, Dorset and the wider South/Thames Valley, the data provides some cautious encouragement. The region is not yet experiencing a broad-based permanent recruitment recovery, but the continued growth in temporary hiring suggests businesses are becoming more willing to invest in people where there is a clear commercial requirement.

That fits with what we are seeing more broadly across the market. Businesses are continuing to focus on operational efficiency and cost discipline, but there is also a growing willingness to invest in areas that support growth, transformation and productivity. The key is making those investments in a measured way.

Confidence Will Be the Next Catalyst

Ultimately, the next stage of the recovery will depend on business confidence. The latest figures provide some encouraging signs. Temporary recruitment has now grown for several consecutive months, temporary vacancies increased for the first time in two years, and permanent placements across the UK have finally stabilised.

The question now is whether this translates into a broader return of confidence around permanent hiring. If businesses gain greater clarity around economic conditions, employment costs and government policy, there is potential for recruitment activity to build further. For now, flexibility remains the defining feature of the market.

The South of England's recruitment market is not yet back to full strength, but the direction of travel is becoming increasingly encouraging. For employers, the opportunity may be to use this period of improving conditions to secure the skills and capacity needed for the next phase of growth, while retaining the flexibility to adapt as the economic picture develops.