IT vacancies slide as candidate numbers climb into 2026

Demand for permanent IT and computing staff ended 2025 falling faster than demand for almost any other kind of permanent worker. The KPMG and REC, UK Report on Jobs, published on 12 January by KPMG and the Recruitment and Employment Confederation (REC) and compiled by S&P Global from a panel of around 400 recruitment consultancies, found that the fall in demand for permanent staff in December was broad-based across sectors. The sharpest drop in vacancies was in secretarial and clerical roles, followed by IT and computing.

The same survey showed permanent placements falling at the quickest rate since August, extending a downturn it has now tracked for 39 months. The pool of available candidates kept growing at a substantial pace, with recruiters naming redundancies as the main cause. Yet starting salaries for permanent staff rose at the fastest rate in seven months.

Fewer jobs, more candidates and firmer pay is an awkward mix for people leaders at smaller UK tech companies. Is the start of 2026 a moment to hire while the market is loose, or a signal to hold headcount until the economy settles?

A market that has gone quiet

The REC and KPMG data is not the only reading pointing that way. The British Chambers of Commerce (BCC) published its Quarterly Recruitment Outlook on the same day, based on more than 4,600 businesses, 91% of them SMEs, surveyed between 10 November and 8 December. Fewer than a quarter (23%) expected to grow their workforce in the next three months, down from 25% in the previous quarter, while 14% expected to shrink it.

Hiring activity has thinned too. Just over half (52%) of the BCC’s respondents tried to recruit in the fourth quarter, against 54% in the third. Only 21% grew their workforce over the quarter and 17% cut it. Labor costs were again the most cited cost pressure, named by 72% of firms.

Official figures are consistent with the surveys. The Office for National Statistics (ONS) estimated 729,000 vacancies in September to November 2025, down 77,000 (9.6%) on a year earlier, with falls in 16 of 18 industry sectors. There were 2.5 unemployed people for every vacancy in August to October, up from 1.8 a year before, and the unemployment rate was 5.1%.

The picture is not uniform. The KPMG and REC survey found the Midlands was the only English area where permanent placements rose in December, and engineering saw the softest fall in demand for permanent staff of any sector.

Plenty of candidates, not always the right ones

For an employer, a rising number of unemployed people per vacancy sounds like bargaining power. The surveys suggest it is narrower than that. The BCC found that 70% of firms that tried to recruit in the fourth quarter still had difficulties. That was down from 75% in the third quarter, but it is still a clear majority. A deeper pool does not mean the right people are in it.

The pay data points the same way. Even after the rise, starting salary inflation for permanent staff remained well below the survey’s long-run trend, KPMG and the REC reported. Temporary pay also rose for the first time in three months. Employers are not bidding up wages across the board, but they are paying more for the hires they do make.

Jon Holt, group chief executive and UK senior partner at KPMG, linked the restraint to technology spending. “Chief execs who have been prioritising increased investment in tech to improve resilience and productivity, will be looking for signs of greater confidence in the wider economy before turning the hiring taps back on,” he said. He added that many firms “continue to pause hiring and are flexing where they can by using temporary staff”.

That cuts both ways for tech employers. If Holt is right, demand for what tech companies sell may hold up better than their own hiring plans. Customers that are investing in technology rather than people still need it delivered, supported and secured, but the suppliers doing that work face the same cost pressures and the same hesitation about adding permanent staff.

Costs and the Employment Rights Act

Both business groups pointed to costs and regulation as reasons for caution. Jane Gratton, deputy director of public policy at the BCC, said: “High taxes and rising wage bills present huge barriers to investment and growth. On top of this, the cost burden of the Employment Rights Act – which the government continues to underestimate – will create further problems.”

Neil Carberry, chief executive of the REC, was more measured about the December figures themselves. “It’s always difficult to draw conclusions from jobs data in December, but the fact that the market slipped back a little on November is a reminder of the pressure employers are under,” he said. He saw “some hope that we are seeing a December dip, rather than a change in the trend”, and called on the government to take “pragmatic approaches on the Employment Rights Act, which is worrying many firms”.

The figure that should concern tech employers most is about training. The BCC found that 22% of firms cut their investment in workforce development in the fourth quarter, slightly more than the 21% that increased it, while 57% left it unchanged. Gratton said this came “at a time when the economy is being held back by pervasive skills shortages”.

For a small software house or IT services firm, skills that are not built inside the business have to be bought. The recruiters’ own data says the price of buying them is already moving up, even in a weak market.

What people leaders should do now

None of this makes the case for a hiring spree. The surveys describe employers waiting for confidence to return, and the December data gives no clear sign of when that will be. But a cautious market is also the cheapest time to fix specific gaps.

Tech employers with a clear need for scarce technical skills, whether in security, data or cloud engineering, are likely to find more candidates in front of them than a year ago, and fewer competing offers if other employers stay cautious. Moving on those roles now, before starting salaries climb further, is a defensible use of a tight budget.

The bigger mistake would be to follow the fifth of firms cutting training. A business that stops developing its own people in a slow year is likely to pay recruiters’ rates to replace those skills when demand returns. Contractors and temporary staff can cover peaks, as KPMG says many firms are already doing, but they do not build capability.

The priority for people leaders in UK tech is clear: hire selectively for the skills that are hardest to find, keep training budgets intact and plan for the cost of the Employment Rights Act before it arrives, rather than after.