UK employers increased their use of temporary workers in June while continuing to hold back on permanent recruitment, reflecting ongoing economic and geopolitical uncertainty, according to the latest KPMG and REC Report on Jobs.

The monthly survey, compiled by S&P Global, found temporary staff billings rose at the fastest rate since April 2023 as employers favoured shorter-term hiring commitments. Although permanent placements continued to decline, the pace of contraction eased to its slowest in three months, suggesting recruitment activity may be stabilising.

Businesses cited uncertainty over the economic outlook and cost pressures as key reasons for favouring flexible staffing arrangements over permanent hires.

Demand for workers nevertheless remained subdued. Overall vacancies fell at the quickest rate since January, driven by a sharper decline in permanent job openings, while demand for temporary staff slipped only marginally.

At the same time, the availability of candidates continued to increase, reflecting ongoing redundancies and weaker recruitment activity. However, the rate of growth in labour supply eased for a fourth consecutive month, with some recruiters reporting that workers had become more reluctant to seek new roles amid an uncertain labour market.

Despite softer demand, competition for skilled workers continued to support pay growth. Starting salaries for permanent staff and hourly rates for temporary workers both increased at their fastest pace since January, as employers sought to attract candidates with specialist skills. However, wage growth remained below the long-term average recorded by the survey.

Regional data showed the decline in permanent placements eased across London, the South of England and the Midlands, while the North of England recorded its first fall in recruitment activity for five months. Temporary billings increased across all four monitored English regions, led by the South of England.

By sector, demand for permanent staff increased only in nursing, medical and care, and engineering. Retail recorded the steepest decline in permanent vacancies, while temporary demand was strongest in blue-collar occupations and engineering.

Lisa Fernihough, vice chair of advisory at KPMG UK, said the figures suggested businesses were becoming more willing to recruit, but remained cautious about making long-term commitments. "The story of the past few months has been the pivot to temporary work," she said, adding that employers were using flexible hiring to continue projects while waiting for greater economic and geopolitical stability.