UK Labour Market Insights - August 2026: Permanent Hiring Stabilises as Engineering and Technology Demand Remains Resilient

Peter Livingstone, Director

18/08/2026

UK Labour Market Insights - August 2026: Engineering and Technology Demand Remains Resilient

The latest KPMG and REC Report on Jobs (August 2026, reflecting July data) provides some of the strongest evidence yet that the UK recruitment market is beginning to recover. After 45 consecutive months of decline, permanent placements stabilised in July, while temporary and contract hiring increased for the fourth consecutive month. Recruiters also reported the first rise in temporary vacancies for more than two years.

For employers operating within engineering, technology and advanced manufacturing sectors, the report highlights the contined demand for specialist skills, continued salary pressures and increasing confidence around strategic hiring decisions.

Permanent Hiring Stabilises After Nearly Four Years of Decline

One of the most significant findings from this month's report is the stabilisation of the overall permanent hiring activity across the UK.

July marked the first month since 2022 that permanent placements did not decline, bringing an end to a 45-month period of contraction and representing a potentially important turning point for the labour market.

Commenting on the latest findings, Callum Licence, Group Head of Advisory at KPMG UK and Switzerland, said:

"Over the past 45 months we have seen the longest recorded period of contraction in the permanent placements index, so to finally have it stable is a big milestone."

While businesses remain selective in their recruitment decisions, organisations are increasingly progressing hiring plans where talent is critical to delivering new projects, innovation and long-term business growth.

Contract Recruitment Continues to Drive Market Recovery

Contract and Temporary billings rose for a fourth consecutive month and remain among the strongest levels recorded since early 2023. Employers continue to utilise contract recruitment and flexible workforce solutions to access specialist expertise while maintaining agility in an uncertain economic environment.

The report also recorded the first increase in temporary vacancies for more than two years, reflecting growing confidence among employers and an improving outlook for project-based hiring.

This trend aligns closely with what Redline Group is seeing across the engineering and technology sectors, where demand for specialist contract professionals remains strong across critical projects and emerging technologies.

Engineering Recruitment Trends 2026: Demand Continues to Outperform

While some sectors continue to experience subdued hiring activity, Engineering was identified as one of the strongest-performing sectors for contract and temporary vacancies during July, alongside continued resilience across IT & Computing disciplines. Temporary vacancy growth was led by Blue Collar and Engineering recruitment categories.

This reinforces a trend Redline Group has observed throughout 2026: employers continue to invest in technical talent where skills are directly linked to innovation, product development and project delivery.

Demand remains particularly strong across:

Electronics & Embedded Systems
Software Development
Electrical Design Engineering
Mechanical Design Engineering
AI & Machine Learning
Advanced Manufacturing
Automation & Robotics
Technical Project Delivery
Technical Sales & Business Development

These remain some of the most active areas of the UK engineering recruitment market despite wider economic uncertainty.

Engineering Sectors Driving Hiring Growth

Although recruitment activity remains selective in some areas, investment continues across several strategically important industries.

Redline Group continues to see strong demand across:

Defence & National Security
Aerospace & Space Technology
Artificial Intelligence Infrastructure
Robotics & Automation
Quantum Technologies
Clean Energy
Advanced Manufacturing
Semiconductor & Electronics Design

These sectors continue to recruit highly skilled engineering and technology professionals to support innovation programmes, infrastructure projects and long-term business growth plans.

Supporting this trend, the latest J.P. Morgan Global Manufacturing PMI remained firmly in growth territory during July, marking a twelfth consecutive month of expansion in global manufacturing activity. Manufacturing output and new orders continued to rise across many major economies, while employment returned to growth, highlighting ongoing investment in production, technology and specialist skills.

For the UK engineering sector, continued expansion within global manufacturing provides an encouraging backdrop for recruitment activity. As businesses invest in automation, advanced manufacturing technologies, electronics design and infrastructure development, demand for experienced engineers and technical professionals is expected to remain resilient despite wider economic uncertainty.

More Candidates Available, Yet Critical Skills Remain Scarce

Candidate availability increased again in July, extending the current growth trend to more than three years. Recruiters cited redundancies, increased job-seeking activity and concerns around job security as key drivers behind the rise in available talent.

However, increased candidate availability does not necessarily mean specialist skills are easier to find.

Recruiters continue to report shortages across a number of highly technical disciplines, including:

Electrical Engineering
Mechanical Engineering
Project Engineering
Control Systems Engineering
Robotics Engineering
Embedded Software
Software Engineering
AI & Machine Learning
Specialist Electronics Engineering

For employers looking to hire engineers in today's market, the challenge is no longer accessing candidates, but securing individuals with the niche technical expertise required to support increasingly complex projects.

Engineering Salaries Continue to Rise

The ongoing shortage of specialist skills is also contributing to increased salary pressures.

Permanent starting salaries increased at their fastest rate for six months during July, while temporary wage growth accelerated to a 26-month high. Recruiters frequently reported employers increasing salary offers to attract and secure candidates with the right experience and technical expertise.

In the engineering and technology sectors, organisations that fail to remain competitive on salary and benefits are increasingly at risk of losing sought-after candidates during the recruitment process.

Business Confidence Appears to Be Improving

Despite continued economic uncertainty, recruiters are beginning to report improving sentiment across the hiring market.

Maxine Bligh, Chief Membership & Innovation Officer at the REC, commented:

"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. And the permanent market is stabilising."

While employers continue to adopt a cautious approach, the latest figures suggest a gradual return of confidence and increased willingness to invest in talent where business-critical skills are required.

Redline Group Market Insight

The August Report on Jobs closely mirrors what our consultants are seeing across the engineering and technology recruitment market.

While the wider labour market remains selective, demand for specialist engineering talent continues to demonstrate resilience. Organisations operating within Defence, Aerospace, Electronics, Automation, Manufacturing, AI and Software development continue to recruit where technical expertise is directly linked to innovation, product development and strategic growth initiatives.

We are also seeing employers become increasingly proactive in their recruitment processes. As competition for highly skilled engineers and technology professionals remains strong, businesses that move quickly and offer competitive salary packages are consistently securing the strongest candidates ahead of slower-moving competitors.

Although candidate availability has improved overall, highly specialised engineering and technology professionals remain in short supply. For employers planning recruitment over the coming months, now is an ideal time to review talent strategies, salary positioning and hiring processes to ensure they remain competitive in an evolving market.

You can arrange a conversation with one of our specialists today. Get in touch with one of our team, email info@redlinegroup.com or call 01582 450054.