Permanent hiring is slowing. Contract hiring is at a three-year high. Here is what that means for your workforce strategy.

The UK jobs market sent a clear signal in July 2026. Organisations are accelerating contract hiring at a pace not seen since 2023 while pulling back on permanent headcount. This is not a seasonal blip. Multiple independent data sources confirm the shift is structural. Here is what is driving it, what it means for hiring managers and candidates, and how to position your organisation for the second half of the year.

Spinwell Global   ·   5 min read   ·   Workforce strategy and specialist recruitment

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The KPMG and REC UK Report on Jobs, produced by S&P Global and published in July 2026, recorded temporary staff billings rising at the quickest rate since April 2023. The Temporary Billings Index reached 52.7 in June, up from 52.2 in May, rising for four consecutive months. At the same time, permanent placements declined, at the slowest pace in three months, but declined nonetheless. The Permanent Placements Index registered 49.1, creeping closer to the neutral level of 50 but still below it.

That combination tells a precise story about where employer confidence sits right now. Organisations are not stopping hiring. They are changing how they hire.

Permanent headcount carries commitment: National Insurance contributions that increased in April 2026, Employment Rights Act obligations now coming into force in phases, redundancy liability and a long onboarding cycle before productivity returns. In an environment of ongoing uncertainty, cost pressure and rapid skills evolution, more organisations are choosing to bring expertise in on a contract basis rather than lock it in permanently.

This is not a crisis. For the right organisations and the right candidates, it is an opportunity worth understanding properly.

52.7 Temporary Billings Index, June 2026, highest since April 2023 (above 50 = growth)

37% Of UK employers plan to reduce permanent hiring due to Employment Rights Act reforms (CIPD)

74% Of UK employers expect the Employment Rights Act to increase their employment costs (CIPD)

Sources: KPMG/REC/S&P Global UK Report on Jobs, July 2026; CIPD Labour Market Outlook, February 2026

What is driving the shift to contract hiring

Several forces are converging simultaneously to make contract hiring more attractive to UK organisations right now.

The Employment Rights Act. The CIPD, the professional body for HR and people development, surveyed more than 2,000 UK employers and found that 74% expect the ERA to increase their employment costs, and 37% plan to reduce permanent recruitment as a direct result. The CIPD noted explicitly that this could have the unintended consequence of encouraging employers to rely more heavily on temporary workers and self-employed contractors to avoid rising costs. That is not a prediction. It is what the data from July 2026 shows is already happening.

Project-led demand returning. Many organisations deferred technology investment during periods of economic uncertainty in 2024 and 2025. Those projects have not disappeared. Pressure to modernise systems, implement AI, strengthen cybersecurity and complete digital transformation programmes has returned, and these are time-bound, deliverable projects. They are well suited to contract resource rather than permanent headcount.

Skills that evolve faster than permanent hiring cycles. In disciplines like AI, cloud engineering, cybersecurity and data architecture, the specific technical requirements can shift materially within 18 months. Organisations are increasingly reluctant to make permanent commitments in areas where the role itself may look significantly different within two years. Contract resource gives access to current expertise without that long-term bet.

Increased candidate availability. The ONS Labour Market Statistics published in June 2026 recorded continued increases in redundancy notifications. UK recruitment consultancies surveyed by S&P Global for the July KPMG/REC report signalled further marked increases in candidate availability. Strong, experienced contractors have returned to the market at the same moment that demand for contract resource is rising.

“Organisations are not stopping hiring. They are changing how they hire. And the shift is structural, not temporary.”

When contract hiring makes sense and when permanent hiring works better

The growth in contract hiring does not mean permanent employment is becoming obsolete. It means organisations need to be more deliberate about which model they use for which role. Getting that decision right is one of the most important workforce strategy choices available in the current environment.

Contract hiring works well when:

• The need is project-specific and time-bound. A cloud migration, a compliance programme, a cybersecurity audit, a digital transformation sprint. These have defined scope and end points. A contractor delivers the expertise and exits without the need for redeployment or redundancy.
• Speed matters more than continuity. Contractors are typically available within weeks rather than months. When a project cannot wait for a full permanent hiring cycle, contract resource removes the bottleneck.
• The skills required are highly specialist and scarce. For disciplines where the global talent pool is small, the permanent market can take months to yield a strong candidate. Contract access to that same pool is often faster because contractors are more mobile and more frequently available.
• Cost flexibility is a priority. Day rates can appear higher than equivalent permanent salaries, but when employer obligations, onboarding costs, benefits and long-term retention are factored in, contract hiring can be more cost-efficient for finite, deliverable work.

Permanent hiring works better when:

• The role is ongoing, core and strategic. Institutional knowledge, long-term client relationships and cultural alignment are difficult for contractors to replicate. Where continuity is the priority, permanent employment remains the right model.
• The organisation is building a team over time. Contractors can fill capability gaps. They are rarely the foundation for building culture or developing internal expertise over time.
• The role requires long-term security accountability. While many cleared professionals work on a contract basis, roles where ongoing security responsibility and continuity of clearance management are critical may benefit from the permanence of employment.

What candidates need to know about contracting in 2026

If you have historically worked in permanent roles, the current market warrants a serious look at contracting. The conditions in July 2026 are more favourable for contractors than at any point since before 2023.

Day rates for specialist contractors in digital, technology, cybersecurity and risk have remained resilient despite broader market softening. Demand for project-based expertise is rising. The availability of contract opportunities through framework agreements such as Digital Outcomes and Specialists 7 means that for public sector-facing specialists, the route to contract work has become more structured and accessible than ever before.

A few important things to understand before making the move:

IR35 status determines how you are taxed. Operating outside IR35 through a personal service company gives you significantly more flexibility in how you manage your income. A role determined to be inside IR35 means you are taxed broadly as an employee, without the benefits of employment. Understanding your status before accepting a contract is essential. The IR35 rules have also changed during 2026 in ways that affect both contractors and the organisations engaging them, so current and specific advice matters.

Security clearance significantly increases your value and deployability. SC and DV cleared contractors are among the most sought-after professionals in the current UK market. If you hold clearance and are considering contracting, your market position is likely stronger than you realise. The roles requiring clearance are also among the least likely to be publicly advertised, which makes the right recruiter relationships even more important.

The right recruiter matters more in contracting than in permanent. Contract roles move at a different pace. The window between availability and placement can be days rather than weeks. A recruiter who already holds your profile, understands your specialism and has active client relationships in your sector is the primary route to opportunities before they are filled.

“Contract roles move fast. The window between availability and placement can be days, not weeks. Being known before you are looking is what makes the difference.”

What this means for startups

For startups, the shift towards flexible workforce models is not new. Most early-stage companies have always needed to access senior expertise before they can justify permanent headcount at that level. What has changed in 2026 is that the supply of experienced fractional and contract professionals has increased significantly, making this a genuine and deep market rather than an informal arrangement.

A seed-funded startup that needs a CFO does not need one five days a week from day one. It needs someone with the right experience, available on a fractional basis, who can build the financial infrastructure the company needs and transition to full-time when the business is ready. The same logic applies to CTOs, Heads of Operations and senior commercial leads.

This is precisely the gap Spinwell Startups was built to address. Any startup, at any funding stage, anywhere in the world. Flat fee placement. Fractional senior leadership. A six-month structured engagement on every hire. Access to a pre-screened global candidate pool of over 108,000 professionals.

The contract and fractional market of 2026 is, in many ways, the natural habitat of the best startup hiring. The flexibility, speed and access to specialist expertise that make contracting attractive for large organisations are the same qualities that define what startups need from the moment they begin hiring.

The Spinwell perspective

We place both contractors and permanent professionals across digital, technology, risk and security, predominantly into public sector programmes but increasingly across private sector and global startup clients from our offices in the UK, Dubai and Singapore.

What we are seeing in July 2026 is consistent with what the independent data confirms. The contract market is the most active it has been in three years. The organisations navigating the current environment well are the ones making deliberate decisions: permanent for roles that are core, ongoing and where continuity matters; contract for work that is project-based, time-bound and specialist.

And the candidates who are thriving in this market are the ones who positioned themselves to be found before the opportunity existed. Whether through an active relationship with a specialist recruiter, a current and well-maintained professional profile, or simply a conversation about the market before the pressure to move arrived.

About Spinwell Global

Spinwell Global is a specialist recruitment consultancy with offices in the UK, Dubai and Singapore. We place contractors and permanent professionals across digital, technology, risk and security into public sector, private sector and startup organisations worldwide. We are an approved supplier on the Digital Outcomes and Specialists 7 (DOS7) framework through the Government Commercial Agency (GCA).

Spinwell Startups provides flat fee, globally-sourced recruitment for startups at any funding stage, anywhere in the world.

 

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Sources

KPMG UK and REC (Recruitment and Employment Confederation), UK Report on Jobs, July 2026. Compiled by S&P Global.

S&P Global / KPMG / REC. UK Report on Jobs: London, June 2026.

CIPD (Chartered Institute of Personnel and Development). Labour Market Outlook, Winter 2025/26. Published February 2026.

CIPD. The Unintended Consequences of the Employment Rights Bill. Research Report, 2025/26.

Office for National Statistics (ONS). UK Labour Market Statistics, June 2026. Published 18 June 2026.

Office for National Statistics (ONS). Redundancies by Age, Industry and Region (RED02). Released 18 June 2026.

House of Commons Library. UK Labour Market Statistics Briefing (CBP-9366). Updated July 2026.

FM Magazine. Temporary Hiring Increases in the UK, Report Shows. Published 15 July 2026.