Britain's employment market showed early signs of stabilisation in July 2026, according to a monthly survey from KPMG and the Recruitment and Employment Confederation (REC). Employers halted a lengthy run of permanent job cuts, temporary vacancies rose for the first time in two years, and starting salaries climbed at their fastest pace in six months. The improvement came even as the same period brought fresh controversy over executive pay at Thames Water and a sharp share-price fall at housebuilder Vistry.
What did the jobs survey find?
The REC/KPMG report showed that permanent placements stabilised in July after 45 consecutive months of decline, with the permanent job placements index rising to 50.0 from 49.1 — the threshold that marks the return to expansion, according to a report citing the survey. Temporary billings grew at their fastest rate since early 2023, as employers turned to flexible staffing arrangements rather than committing to permanent hires.
Pay growth also accelerated. Starting salaries for permanent roles rose at the fastest rate in six months, while temporary wage growth hit a 26-month high, the survey found. Although the increase in starting pay remained slower than its long-run average, the direction of travel was described as encouraging by industry figures. Separately, official data from the Office for National Statistics covering March to May 2026 showed annual growth in employees' average earnings running at 3.4% for regular pay and 4.3% for total pay, according to the Office for National Statistics.
Callum Licence, head of advisory at KPMG UK and Switzerland, said businesses were beginning to invest again despite continued uncertainty.
Despite ongoing uncertainty it's encouraging that businesses are starting to press ahead with investment, which means across the board we are starting to see the data moving in the right direction. This is most pronounced in the continued rise of temporary work, where employers have been looking at flexible approaches and hiring has been growing for several months, and permanent hiring is starting to turn a corner.
Licence added that temporary staffing demand was growing across the country at its fastest pace since August 2023, while permanent vacancies were falling more slowly. As a result, overall demand for workers declined at its softest rate in 22 months.
Regionally, the picture was mixed. London and the Midlands recorded renewed growth in permanent staff hiring, with London reaching its strongest rate of expansion in almost four years, while the south and north of England saw further declines. Temporary hiring growth eased from June's 38-month high but remained among the strongest levels recorded since early 2023, with the north of England posting the steepest rise, followed by London. Growth in the south was softer, and billings slipped slightly in the Midlands.
Maxine Bligh, REC's chief membership and innovation officer, described the figures as a hopeful signal after a prolonged downturn.
Rays of light are beginning to break through for the job market as employers revive hiring plans. Temporary vacancies are up for the first time in two years, while recruiters' revenue from supplying temporary workers has risen for a fourth consecutive month. Remarkably, this is the first month without a decline in permanent placements since Liz Truss resigned as prime minister in 2022, underlining just how prolonged the downturn in permanent hiring has been. That makes it all the more important that the government takes decisions now that build business confidence and momentum in hiring.
Not every measure points in the same direction, however. According to , advertised wage growth cooled to an annual rate of 3.9% in the three months to June 2026, its slowest pace since February 2022, even as demand for artificial-intelligence skills rose. An earlier report in July also noted that the broader downturn in hiring had eased only slightly, with temporary staffing and starting pay improving while permanent placements continued to contract at that stage.
What is Robert Walters seeing in the recruitment market?
Toby Fowlston, chief executive of recruitment firm Robert Walters, described “shards of light in certain parts of the world,” including in the UK, as his company reported a 9% rise in net fee income for the first half of the year.
Fowlston said the REC/KPMG data matched what his firm was observing, particularly in legal, technology and accounting recruitment, even as consumer-facing sectors such as retail and hospitality continued to struggle to fill roles. He said the bottleneck was less about the volume of vacancies and more about candidates' willingness to move jobs.
But technology in particular, the job flow hasn't really been the challenge. The challenge has been the confidence levels, particularly of candidates to move. And I was really encouraged to see that starting salaries for permanent roles from the recent data are now at the fastest rate for six months. And we know temporary wage growth is continuing to increase as well. People are impacted by the cost of living. People are impacted, particularly those with fixed rate mortgages, with interest rates having obviously shifted over the last three to five years. So our view is that you've got candidates now who are now actively starting to consider the move.
Fowlston noted that around 18% of the workforce is employed in the public sector, with the remainder in the private sector — of which roughly 60% work for small and medium-sized businesses with fewer than 250 employees. Comparing the current climate with the aftermath of the 2008/9 financial crisis and the 2020/21 Covid pandemic, he said this recovery looked different.
That's not what we're seeing at the moment. We're seeing shards of light in certain parts of the world. The UK is most certainly one of them. So I'm actually quite encouraged by what we're seeing in the UK. We've got the budget coming up, in the autumn [on 28 October]. I think there is a great opportunity there to bring some real confidence back into the employment sector and remove some of the red tape that I think is prohibited. Some of the employers are making hiring decisions.
Rob Wood, chief economist at Pantheon Macroeconomics, urged caution in interpreting the improvement, suggesting some of it may reflect shifting sentiment rather than a durable trend.
There may be an element of a “Burnham Bounce” in the survey, as the drop in temporary hiring and rise in permanent in July—usually a sign of falling uncertainty—sits oddly with the resumption of hostilities in the Middle East in July. So Sentiment could easily drop back somewhat. Wage growth accelerated to the strongest since January, and the permanent salaries index lies above the 52.3 average seen in 2025, suggesting there has been no slowdown in pay growth over the past 18 months. Vacancy growth recovering and staff availability high but easing slightly also point to a labour market beginning to steady.
Wood added that most surveys, aside from the PMI, were now consistent with a labour market where employment and wage growth are plateauing at a rate broadly in line with inflation targets.
What is happening with Thames Water's finances?
Thames Water has paid its chief financial officer, Steve Buck, a £1m signing fee, a disclosure that comes amid intense scrutiny of the company's finances as it seeks to avoid falling into public ownership. The utility confirmed the payment was made last month in a letter sent last week by its chair, Sir Adrian Montague, to MPs on the Environment, Food and Rural Affairs Select Committee, a disclosure first reported by a national broadcaster.
Buck joined Thames Water in April 2025, and it is understood the seven-figure payment was not made until last month, after the company had taken legal advice over its contractual obligations. Buck's base package includes an annual salary of £500,000, a 12% pension allowance and a £12,500 car allowance, according to Thames Water's own announcement of his appointment, which took effect from 7 April 2025. The money for the signing fee is believed to have come from emergency funding provided by the company's lenders, according to a report from a national broadcaster.
Thames is among at least eight water companies facing scrutiny over continuing environmental failures linked to its ageing infrastructure. The company supplies water and sewage services to 16 million customers across London and the Thames Valley and has been on the brink of collapse for more than two years, with its shareholders having effectively abandoned the business during that time. The utility owes roughly £20bn and has been working with creditors and government officials to find a way forward, and last year it was handed a record £122.7m fine from the regulator Ofwat, which said the company had “let down its customers and failed to protect the environment.”
The prime minister, Andy Burnham, has previously signalled willingness to bring Thames Water into public ownership in order to write off billions of pounds in debt, and has said he would like to see “greater public control” of key water and energy utilities. Failure to reach a deal could lead to Thames Water being forced into a special administration regime, a form of temporary nationalisation intended to keep the business operating until a viable long-term solution can be found. Thames Water's chief executive, Chris Weston, has previously warned that special administration could leave taxpayers bearing the cost, and has instead backed a rescue deal put forward by the firm's lenders. Weston has said he wants the company to “do better” but that some of the targets it had been set were “not realistic.”
This dispute follows earlier reporting that Thames Water's creditors were preparing a £10bn rescue bid despite the prospect of temporary nationalisation, after the government had earlier rejected an earlier version of that £10bn rescue plan over concerns about the burden on consumers. The company had separately secured funding to keep operating through the end of the year amid its debt and pollution challenges, and its lenders have also offered a golden share and greater local authority involvement to block nationalisation after the earlier plan was rejected.
Sir Adrian Montague told MPs that the £1m payment to Buck followed legal advice Thames Water had taken over its obligations, and that the sum had been agreed with creditors last year as part of arrangements intended to keep the company running while a longer-term takeover by creditors is negotiated. The continued payment of large sums to executives is likely to intensify calls for the government to place the company into a special administration regime. This disclosure follows a separate report last month that pay for water company bosses rose to £25.3m despite a government bonus ban, with firms including Anglian Water and United Utilities relying on retention payments and allowances to boost executive compensation. In response to the latest scrutiny, Thames Water has now said its chief executive and chief financial officer will not be eligible for performance-related pay for the 2026-27 financial year, according to a report on the company's response.
Cat Hobbs, director of the campaign group We Own It, which calls for the water industry to be nationalised, said the latest disclosure showed contempt for customers.
The Thames Water saga is beyond a joke a this point - they are completely taking the mickey. Andy Burnham must step in immediately and take back the company … the shareholders have walked away, and the debt can be drastically cut and refinanced more cheaply in public hands. It's criminal to let this rip off continue with 16m households paying the price.
What does the lenders' rescue deal involve?
The rescue deal proposed by Thames Water's creditors would inject £3.35bn of fresh equity and £6.25bn of new debt into the company, while writing off £9.6bn of its existing borrowings, according to a national broadcaster's report. However, the same deal has been estimated elsewhere to leave Thames Water paying roughly £749m in fees and related costs if it goes ahead, according to a separate financial report, a figure that critics argue underscores the cost of the creditor-led rescue route compared with public ownership. Thames Water has warned it could run out of money by the end of the year, even as creditors have said they intend to keep financing the company into 2027, according to the national broadcaster's report.
Why did Vistry's share price fall?
Shares in UK housebuilder Vistry fell by as much as 9% after a report that credit insurer Allianz Trade was reducing the cover it provides to Vistry's suppliers, a move the company swiftly denied. The stock was the biggest faller on the FTSE 250 index following the report.
According to reporting cited in the original coverage, Allianz Trade had in recent weeks warned suppliers that it was adjusting credit limits for Vistry, a change that could reduce cover by as much as 70%, with the final level depending on the company's financial performance in the weeks ahead. Suppliers typically buy credit insurance to protect against the risk that a customer fails to pay for goods or services; when such cover is withdrawn or reduced, suppliers can respond by demanding upfront payment, which would tighten Vistry's cashflow. Credit insurance for a single company is often spread across several insurers, meaning a reduction from one provider does not necessarily leave suppliers entirely uncovered.
Vistry pushed back firmly on the report, saying its supply chain remained well supported.
Credit insurers continue to provide substantial cover for our supply chain which more than meets the group's requirements on an ongoing basis. We are not aware of any supplier withdrawing trade from Vistry due to credit insurance changes and we have seen no interruptions to our supply chain. We maintain positive relationships with our suppliers as we continue to build at scale and pace, delivering the high-quality homes this country needs.
The share-price fall comes weeks after Vistry warned it expected to post a loss of around £30m for the first half of the year, having resorted to heavy discounting to attract buyers for unsold homes. In recent years the company has shifted its business model toward building social housing in partnership with housing associations, local authorities and build-to-rent investors.
What happens next?
The government's official “UK Labour Market: August 2026” statistics release is scheduled to be published later this month, according to the government's statistics announcement page, which will offer a further, independent check on whether the tentative improvement seen in the REC/KPMG survey is being sustained. Recruiters and economists will be watching closely to see whether July's stabilisation in permanent placements continues or, as Pantheon's Rob Wood suggested, proves to be a temporary bounce.
At Thames Water, the company's ownership and financing remain unresolved, with creditors continuing to negotiate a takeover alongside discussions over regulatory leniency on future fines. The company is still in talks with the government, regulators and creditors over a restructuring plan, and the timeline is time-sensitive given Thames Water's warning that it could run out of money by the end of the year, even though creditors have indicated they intend to keep financing the company into 2027. Toby Fowlston of Robert Walters also pointed to the autumn budget, due on 28 October, as a moment that could shape hiring confidence, saying he hoped it would ease regulatory burdens that he believes are holding back employer decision-making.
Key Facts
- The REC/KPMG permanent placements index rose to 50.0 in July 2026, ending 45 months of decline, according to a report citing the survey.
- Temporary vacancies rose for the first time in two years, with temp billings growing at their fastest pace since early 2023.
- Starting salaries for permanent roles grew at their fastest rate in six months; temporary wage growth hit a 26-month high.
- Official ONS data for March–May 2026 showed regular pay growth of 3.4% annually and total pay growth of 4.3%.
- Thames Water paid CFO Steve Buck, who joined in April 2025, a £1m signing fee last month, disclosed in a letter from chair Sir Adrian Montague to a parliamentary select committee.
- Thames Water owes roughly £20bn and was fined a record £122.7m by Ofwat last year; its CEO and CFO will not be eligible for performance-related pay in 2026-27.
- The lenders' rescue deal would inject £3.35bn of equity and £6.25bn of debt while writing off £9.6bn of existing borrowings, though it could cost Thames Water around £749m in fees.
- Vistry shares fell up to 9% after a report on reduced credit insurance cover for its suppliers, which the company denied.
