The Recruitment and Employment Confederation has warned that the government must rebuild employer confidence if it wants to unlock stronger hiring, investment, and labour market momentum.
The REC’s latest JobsOutlook survey, published on 28 July 2026, found that employers remain cautious about the wider economy even though hiring intentions have improved since the first quarter of the year. The organisation said the new government has an opportunity to turn economic “doubters into believers” by giving companies greater confidence in the UK’s growth prospects.
The survey points to a labour market that is not collapsing but remains constrained by uncertainty. Employers are still looking to hire, but decisions are being shaped by cost pressure, demand concerns, policy change, and doubts about the economic outlook.
Recruitment confidence carries weight because hiring is often one of the first areas affected when companies become unsure about trading conditions. Permanent recruitment can be delayed, temporary staffing may be used to preserve flexibility, and investment in training or new roles can be postponed until management teams have clearer revenue expectations.
The REC’s message follows a period of higher employment costs, National Insurance pressure, wage inflation, weaker demand in some sectors, and ongoing questions about productivity. Companies may need people, yet the cost of adding headcount has become more difficult to justify without confidence that demand will follow.
The caution is already visible in early-career recruitment, where graduate hiring is being squeezed by cost control. The REC data suggests that restraint is part of a wider pattern rather than a narrow graduate-market problem.
The policy environment is also changing. New apprenticeship incentives, technical education reforms, employment rights changes, and youth employment measures are all being introduced or prepared. These policies can support the labour market, but employers must understand how they affect costs, obligations, and workforce planning before confidence turns into hiring.
The REC has welcomed support for apprenticeships while calling for more help with hiring costs. That position reflects a practical employer concern: skills programmes are useful, but they do not remove the immediate cost of recruitment, onboarding, supervision, and early productivity gaps.
The survey sits at the intersection of economic sentiment and workforce strategy. Companies facing skills gaps cannot indefinitely defer hiring without damaging capacity, service, innovation, or succession planning. Recruiting into uncertainty, however, can increase margin pressure if demand weakens or costs rise faster than revenue.
Some sectors are likely to remain active regardless of broader caution. Health, care, construction, engineering, technology, logistics, clean energy, and regulated financial services continue to need specific skills. The problem is often less about whether vacancies exist and more about whether employers can find people at the right level of skill, pay, and location.
Temporary and contract hiring may remain attractive where businesses need capacity but want to limit long-term commitments. That can help companies respond to demand spikes, projects, and absences, although overreliance on short-term staffing can weaken training pipelines and institutional knowledge.
Confidence is also shaped by the consistency of policy. Employers can adapt to higher standards and new obligations when timelines are clear and guidance is practical. Frequent changes, unclear implementation, or overlapping reforms can make workforce decisions harder, particularly for smaller organisations without specialist HR or legal teams.
Hiring, training, automation, and job redesign are becoming increasingly connected. Employers may use AI and automation to reduce some vacancies, but most still need people who can manage customers, operations, compliance, technology, and change. Recruitment restraint can create hidden future costs if it weakens the talent pipeline too far.
The REC’s survey does not point to a labour market without demand. It points to a market in which employers need stronger evidence that growth, policy stability, and cost conditions justify committing to people. The government’s challenge is to turn skills and employment announcements into enough confidence for companies to act.
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