UK Labour Market Insights – February 2026 Trends

Key Trends for Technology & Electronics Recruitment

The latest KPMG & REC UK Report on Jobs (February 2026) shows early signs that the UK labour market is stabilising after a challenging 2025. Although conditions remain competitive, employers in electronics, engineering, technology, and high‑reliability manufacturing are now operating in an environment that presents clear strategic opportunities.

This summary distils the most relevant insights for HR leaders, talent strategists, engineering directors, and C‑Suite decision‑makers.

📊 Key Findings from the January Labour Activity

1. Permanent hiring decline slows to the softest rate in 18 months

Permanent placements continued to fall in January, but at the slowest rate since mid‑2024, signalling early stabilisation. Some employers have begun lifting hiring freezes as confidence improves and post‑Budget clarity returns.

• The Midlands recorded modest growth.
• The North saw the softest declines, outperforming London and the South.

2. Contract / Temporary billings rise

Temporary hiring increased slightly in January, only the second uplift since June 2024. This was driven by short‑term project needs and cautious workforce expansion.

• Growth strongest: Midlands & South
• Declines persisted: London & North

3. Candidate availability is still rising, but growth slows sharply

Candidate supply increased again in January, but at the slowest pace in 12 months. Despite cooling momentum, overall availability remains historically high following widespread redundancies across 2025.

This creates a favourable window for employers to secure high‑calibre talent before competition intensifies.

4. Starting salaries and contract rates rise at the fastest pace in over a year

Strong competition for specialist skills, especially in engineering, software, AI, and electronics, pushed starting salaries to their fastest rate of increase in 18 months.

Contract/temporary rates also rose, marking the joint‑fastest increase in 20 months, with London leading pay pressures.

Industry Commentary

Lisa Fernihough, Head of Advisory at KPMG, commented:

“It’s encouraging to start this year with tentative signs that hiring appetites are beginning to improve…
Skill shortages in specialist areas continue to impact the market, particularly where competition for talent remains intense.”

🔧 Insights for Electronics, Engineering & High‑Technology Leaders

Even as the wider labour market cools, engineering and high‑technology sectors continue to outperform.

1. Engineering demand remains strong

Engineering saw one of the mildest declines in permanent vacancies, highlighting ongoing demand for niche technical skills across sectors, including aerospace, defence, semiconductors, and advanced manufacturing.

2. Specialist skill shortages are intensifying

Core roles in short supply include:

• Electronics & Electrical Engineers
• Embedded & Software Engineers
• AI/ML & Data Engineering talent
• Commissioning, Project & Process Engineers
• Cyber Security
• Technical Sales for high‑technology verticals

3. Salary inflation signals a return to competitive hiring

Employers are raising salary offers to secure scarce engineering talent, especially in regions with high‑growth activity, such as:

• Opto‑electronics
• Quantum technologies
• Aerospace & defence
• Semiconductor manufacturing
• Energy & Renewables

4. Candidate availability presents a strategic advantage

Despite slower growth, engineers, developers, and technical specialists remain more available than at any point in the last 3 years, a direct result of restructuring across multiple sectors in 2025.

This window will not last, particularly as AI‑driven investment accelerates.

📈 Official ONS Vacancy Data

ONS figures show a slight increase in vacancies in Q4 2025:

• +10,000 additional job opportunities
• Total UK vacancies now 734,000

While still below pre-pandemic highs, this uptick signals stabilisation entering 2026.

 

Outlook for 2026

Despite weak consumer sentiment, the UK economy is expected to grow 1.3% in 2026, with economists forecasting a gradual pickup in employer confidence.

The AI boom, spanning automation, robotics, data, and machine learning, continues to reshape skills demand and will remain a defining theme throughout the year.

 

📡 What This Means for Your 2026 Talent Strategy

For HR leaders, engineering directors, and C‑Suite executives, the actions are clear:

• Act now on critical hires

Salary inflation and competition are expected to accelerate as confidence returns.

• Recognise that specialist technical roles remain hard to fill

Shortages persist across engineering, electronics, software, AI, and cyber.

• Build flexibility into workforce planning

Contractors, fixed‑term experts, and structured work packages will remain crucial in balancing delivery expectations and cost control.

• Prioritise employer brand, hiring agility, and speed‑to‑offer

Top technical talent is gained or lost based on process efficiency.

• Prepare for an AI‑driven shift in skill requirements

Demand for AI, automation, and data‑centric roles is rising sharply across all technical disciplines.

• Invest in attraction, retention, and reskilling

Upskilling teams in digital engineering, automation, and advanced manufacturing is now essential, not optional.

 

📈 Redline’s January 2026 Results Reinforce These Trends

Redline recorded the highest number of placements in five years, with electronics & technology hiring activity continuing to outperform broader UK labour indicators.

📞 If you’d like tailored insight for your talent strategy

We’d be pleased to discuss how these trends apply specifically to your engineering, R&D, sales & marketing, manufacturing, operations, or technology teams. Let's arrange a conversation, contact info@redlinegroup.com or call 01582 450054