UK recruiters face dire year with tough job market, AI threat

[LONDON] UK recruiters face another difficult year, as the labour market continues to deteriorate, compounded by growing threats from artificial intelligence. 

Pagegroup, Hays and Robert Walters will all provide market updates this week, in the shadow of recent data showing UK employers having cut back hiring again in December 2025 because of rising costs and growing uncertainty.

“As we head into the new year, this restraint is likely to remain in the near term,” Jon Holt, group chief executive and UK senior partner at KPMG, said in a statement.

That does not bode well for recruiters, whose earnings are expected to continue to edge lower in 2026.

Both temporary and permanent hiring are expected to remain muted this year, though permanent roles will suffer the most. 

“Permanent staffing faces a tough 2026 as the segment remains under pressure, with workers showing a limited appetite to switch roles amid geopolitical and economic uncertainty,” Bloomberg Intelligence (BI) analysts Stuart Gordon and Evgeniy Batchvarov said.

Candidates decline interviews or withdraw late in the process, the BI analysts said, while companies increasingly opt for the flexibility of short-term employees.

There are also more counteroffers, and hiring decisions are taking longer, complicating the hiring process. “Permanent placement volume is unlikely to recover until macroeconomic indicators improve,” they added. 

Pagegroup and Hays are particularly exposed to the permanent side of the market.

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Net fees in the segment have fallen by double digits since 2019, driving an 85 per cent cut in profit over the period for the two companies, said Simon Lechipre, an analyst from investment bank Jefferies. 

“We expect gross margin performance to remain subdued, with temporary volumes remaining negative across some of the key countries, and the permanent business underperformance continuing,” Lechipre added. 

The double threat of AI

Meanwhile, AI presents a double threat, as it could disrupt the labour market itself and make recruiters’ services redundant. 

The technology is already having an impact on the job market. Consultancy company McKinsey & Co cut 200 global tech jobs as it shifted more responsibilities to AI, while Dutch lender ING Groep and German airline Deutsche Lufthansa have said positions would be at risk as the tech takes hold.

This is a problem for a company like Hays, whose exposure to IT, accounting and finance roles leaves it vulnerable to those headwinds, Lechipre said.

Meanwhile, recruiters themselves could see their usefulness eroded by AI.

“As AI improves skills assessment, screening and workflow automation, routine recruiter tasks could become redundant, reshaping industry structure and requiring lengthy and consistent restructuring of the existing industry players,” BI’s Gordon and Batchvarov said.

AI lowers barriers to entry and new job marketplaces are popping up – Upwork, for instance, connects businesses with freelancers – which could convince more employers to directly manage recruitment.

That increases the risk of “disintermediation” for recruiters, aggravating the existing challenge of lower volumes of clients and candidates. 

There are some green shoots in the US, a more attractive hiring market than Europe or the UK, and cost savings from Pagegroup’s restructuring programme could help protect profit. 

Still, across the recruitment industry, “cyclical headwinds are exacerbated with incremental structural challenges, which should keep earnings lower for longer”, Lechipre said. BLOOMBERG