Hot Topics in the UK Job Market: What's Shaping Hiring in Mid-2026

It's been a little while since our last update, so it felt like the right moment to take stock of where the UK job market actually stands. Between geopolitical shocks, AI reshaping job descriptions overnight, and ongoing employment law reform, there's a lot for both employers and candidates to keep track of. Here's what we're seeing on the ground.

1. The market is stabilising, but cautiously

After a rocky first half of the year, driven in part by the conflict in the Middle East, the latest KPMG and REC Report on Jobs shows permanent placements returning to levels last seen before the disruption, temporary demand rising, and pay growth accelerating. That said, permanent vacancies are still declining overall, just at a much slower pace than a few months ago, and redundancies continue to push candidate availability up. The headline: recovery is underway, but employers are still hiring with one eye on the horizon.

2. Temp and contract hiring is having a moment

With confidence still fragile, more businesses are choosing flexibility over commitment. Temporary billings have been rising at their fastest rate in over three years, as employers use contract and temp-to-perm arrangements to de-risk hiring decisions while they wait for clearer signals on the economy and on incoming employment law changes. If you're a candidate open to contract work, this is a genuinely strong market to be in right now.

3. AI is showing up in job ads everywhere, not just tech

This is arguably the biggest shift we're tracking. AI-related job postings have kept climbing even as overall hiring has cooled, and the surge isn't confined to software and data roles. It's showing up across finance, HR, marketing, and project management too. Employers increasingly expect candidates in these functions to be comfortable using AI tools day-to-day, not just aware of them. In finance particularly, there's a real gap opening up: most finance leaders want their teams using AI, but relatively few professionals can point to hands-on experience taking responsibility for AI-assisted output. Candidates who can genuinely demonstrate this are standing out.

4. Skills-based hiring is gaining ground

Employers are placing more weight on demonstrable, current skills, especially digital and AI literacy, rather than relying solely on job titles or years of experience. For candidates, this is good news: it opens doors for people who've built relevant capability outside a traditional career path. For employers, it means job specs and interview processes need to test for real, applied skill rather than assuming it from a CV.

5. Employment law reform is still landing

The Employment Rights Act 2025 continues to work its way through implementation, with further changes expected around probation periods, statutory sick pay, flexible working rights, and the new Fair Work Agency. A lot of the caution we're seeing in permanent hiring is tied directly to this: businesses want more certainty on the detail before committing to headcount growth. Worth keeping an eye on if you're planning hiring into late 2026 and 2027.

6. Specialist and technical sectors remain resilient

While the broader market has been subdued, demand for specialist engineering, technology, and technical skills has held up well, alongside pockets of strength in manufacturing, logistics, and warehousing. Skills shortages in these critical disciplines persist even as candidate availability improves elsewhere, which is keeping pay growth for in-demand specialists moving in the right direction.

What this means for you

If you're hiring, flexibility is currently your best tool: temp-to-perm and contract routes let you secure good people without over-committing while the picture becomes clearer. If you're job hunting, leaning into demonstrable AI and digital skills, even outside a technical role, is one of the clearest ways to stand out in a market where employers are being more selective.