New data suggest the decline in UK hiring may be beginning to stabilise, as recruitment activity shows tentative signs of improvement and the services sector experiences renewed growth.
An index tracking permanent hiring, compiled by the Recruitment and Employment Confederation (REC) and KPMG, rose to 49.2 in February from 46.9 in January. While the reading remains just below the 50-point mark separating growth from contraction, it represents the strongest result since March 2023 and indicates the pace of decline in recruitment is easing.
Vacancies for full-time roles continued to fall during February, but the rate of decline moderated compared with previous months. Recruitment leaders interpret this as a potential turning point for the labour market, which has been under pressure for over two years due to rising employment costs and economic uncertainty.
Businesses have faced rising payroll expenses after increases in employer national insurance contributions and higher statutory wages introduced in Chancellor Rachel Reeves’s early budgets. These factors, combined with weaker economic confidence, have particularly affected entry-level roles and younger workers. Official figures show unemployment reaching its highest level since the pandemic, with youth unemployment climbing to 16.1 percent.
Despite these challenges, Neil Carberry, chief executive of the REC, said the figures point to gradual stabilisation. “While February’s report is by no means a source of unalloyed celebration, it does suggest that the worst of the hiring slowdown has passed,” he said. Carberry noted that global instability could still cause volatility, but the stabilising trend has continued into the new year.
The survey also showed that wage pressures are beginning to ease. Starting salaries for permanent roles and pay rates for temporary workers continued to rise, but at a slower pace than earlier in 2025 and below long-term averages. This moderation may provide some relief to employers grappling with high labour costs.
Temporary recruitment weakened in February, with the retail sector reporting the steepest decline in short-term hiring, reflecting continued pressure on consumer spending. Engineering and technical sectors saw smaller drops in temporary vacancies, indicating that demand for skilled workers remains relatively strong.
Separate research from BDO highlights that growth in the services sector, which accounts for around 80 percent of the UK economy, may be helping to support hiring levels. BDO’s services output index rose to 98.80 in February, its strongest reading in a year. Analysts suggested the improvement could partly reflect government policy changes, including softer increases in business rates for pubs and hospitality venues.
While these indicators are encouraging, economists caution that recovery may remain fragile. Rising energy prices linked to geopolitical tensions in the Middle East could push inflation higher, increasing costs for businesses and discouraging large-scale recruitment.
For now, the slowdown in falling vacancies and stronger services activity provide tentative signs that the recruitment downturn may be nearing its end. Employers, however, are likely to approach hiring cautiously, meaning improvements in job creation are expected to be gradual rather than rapid in the coming months.
