Permanent placements have now fallen for 44 consecutive months. That is not a blip. It is a structural shift, and if your agency is still operating as though 2021 is just around the corner, the data suggests it is time for a rethink.
This does not mean perm recruitment is dead. It means the balance has changed, and agencies that only operate in the permanent market are increasingly exposed to a set of pressures that are not going away any time soon.
What the data actually says
The KPMG and REC UK Report on Jobs has tracked a consistent story throughout 2025 and into 2026. Permanent hiring activity remains subdued, with the permanent placements index sitting at 47.5 in April. Anything below 50 signals contraction. The pace of decline has softened compared with much of 2025, which is encouraging, but confidence is not yet strong enough to drive widespread permanent expansion.
Meanwhile, temporary hiring is telling a different story. Temp billings growth in April reached its strongest level in two and a half years. Temporary vacancies are now recording their slowest rate of decline in almost two years. Demand for flexible workers is holding up considerably better than demand for permanent staff.
The reason is not complicated. Businesses still need resource and operational capacity. They are simply becoming more cautious about how they access it. Long-term headcount commitments feel risky when economic conditions remain uncertain, costs are rising, and hiring decisions are taking longer to get signed off.
For clients, temp and contract workers offer flexibility, speed, and lower long-term risk. For recruitment agencies, that creates a genuine opportunity. But only if you are set up to respond to it.
Why perm-only agencies are feeling the pressure
If your agency focuses exclusively on permanent placements, you are currently operating in a market where your core product is in declining demand. That does not mean you cannot win business. Perm recruitment will always be part of the picture. But longer sales cycles, slower conversion timelines, and cautious clients are the reality right now.
There is also a competitive dynamic to consider. Agencies that can offer both permanent and contract solutions are increasingly well placed to have broader conversations with clients. When a client says they are not ready to hire permanently, an agency with a temp offering can still meet that need. A perm-only agency walks away empty-handed.
Research from 3R found that many specialist tech recruiters now operate with a 64/36 temp to perm split, reflecting continued client caution around permanent hires while embracing hybrid staffing models. That ratio would have looked very different five years ago.
What perm-focused agencies can do right now
The good news is that you do not have to overhaul your entire business model overnight. There are practical steps you can take to adapt without losing what makes your agency strong.
Have honest conversations with your existing clients
Your current clients are the best starting point. Talk to them about their workforce plans for the next six to twelve months. Are they planning permanent headcount growth, or are they looking for more flexible solutions? Understanding their actual hiring intentions, rather than assuming them, puts you in a much stronger position to be useful.
Consider temp-to-perm as a bridge
Temp-to-perm arrangements are increasingly popular with clients who want to hire but are nervous about making a permanent commitment straight away. This model gives both sides a trial period, reduces risk for the client, and keeps your agency relevant throughout the process. It is a natural entry point into the temp market for agencies with strong perm relationships.
Use your CRM to spot the signals
Your recruitment CRM holds more intelligence than most agencies use day to day. Look at which clients have gone quiet on perm vacancies. Look at your active pipeline and identify where deals are stalling. These are the clients most likely to be open to a different conversation. A well-maintained CRM gives you the data to have that conversation proactively, rather than waiting for clients to come to you with a need you may not be set up to fulfil.
Get your processes and compliance in order before you scale
Moving into temp recruitment is not just a sales decision. It brings different operational requirements, including timesheet management, payroll, and compliance obligations. If you are exploring this route, make sure your systems can support it. That means having the right infrastructure in place before you start promising clients a service you cannot yet deliver.
The bigger picture
The shift towards temporary and contract hiring is not a short-term response to a difficult economy. It reflects a longer-term change in how businesses think about their workforce. The Employment Rights Act, ongoing cost pressures, and the pace of change in many industries all point towards flexibility becoming a permanent feature of the hiring landscape.
For perm-focused agencies, the question is not whether to take this seriously. The question is when to start, and how.
The agencies that will come out of this period in the strongest position are the ones that move with their clients rather than waiting for the market to return to what it was. That means being honest about what your clients need right now, building the capability to meet it, and using the data you already have to stay one step ahead.