Recruitment sector contributes more than £40 billion a year to the UK economy despite tough job market

Economic uncertainty and a lack of bold growth strategies from successive governments are squeezing the job market, according to the Recruitment and Employment Confederation’s latest Recruitment Industry Status Report (RISR).

Since 2024, the job market has tightened, with fewer placements and shorter contracts, but flexible and temporary work remains a critical pillar to meeting people’s needs and helping the economy grow.

Covering the last completed financial year for REC members (2024 or 2024/5, depending on the firm), the REC report draws on recruitment firms’ final full-year results to spotlight the recruitment sector’s resilience amid fierce economic headwinds.

It shows a fall in demand for temporary and permanent workers from businesses, reflecting a particularly tough job market in some otherwise labour-intensive sectors, such as retail and hospitality.

The report estimates that on any given day in 2024, 872,000 temporary or contract workers were on assignment, down 17.6% from the previous year. The average length of assignment for temporary workers among respondents was 18 weeks in 2024. This is down from 22 weeks in 2023. It is important to view this number in the longer-term context as it is still higher than the 15-week average in 2022.

REC Chief Executive Neil Carberry said:

“Flexible workers get the job done, and temporary, contract and agency work helps businesses thrive. For too long, policy makers have looked down their noses at flexible work, ignoring feedback from workers and companies alike that it boosts opportunity, efficiency and growth. Nowhere is this more true than in the public sector, despite the wrong-headed attacks by unions and changes made by officials that push costs up, not down.

“Recruiters are navigating a low growth economy as the UK works toward recovery. The sector has pushed hard for pragmatic regulation, particularly in the new Employment Rights Bill and also the treatment of temporary and contract workers.

“Recruitment makes a significant contribution to the UK economy and is proving resilient in a sticky job market. Technology is transforming how businesses hire and new firms are entering the market. The sector is evolving rapidly and is positioning itself as a trusted adviser on training, legal changes, AI adoption, shifting workforce demands and inclusion. This annual survey shows an industry that is adapting and leading even as conditions remain challenging. With stronger government support on growth, skills reform and employment law, the recruitment sector could unlock even greater potential for the economy in the next year.”

It is estimated that the industry made 536,400 permanent placements in 2024, a drop from the 806,400 permanent placements estimated in 2023 (33.5% decrease). Pre-pandemic, recruiters were making an average of one million perm placements a year.

A cooling labour market, rapidly rising unemployment-to-vacancies ratio and subdued national economic growth has put the sector’s GVA in 2024 at £40.6 billion. This is less than the GVA in 2023 of £44.4 billion.

Yet, there were more UK recruitment enterprises in both 2025 (31,345) and in 2024 (31,225), than in 2023 (29,635). But the number of people employed in the recruitment sector was down marginally in 2024 (236,470) on 2023 (243,118).

This year’s RISR finds that a cashflow crisis is stalling hiring and growth for UK recruitment firms.

As part of its wider annual RISR, REC can reveal that 42% of recruiters surveyed report that cashflow pressure has constrained their business’ growth in the past 12 months. One in three firms (34%) felt that their cashflow position has worsened this year and that they are facing difficulties in operating effectively as a result. And 61% said cashflow pressure are impacting their ability to invest - with just 20% saying it has not.

The 66 recruiters who completed this smaller survey as part of RISR, from across the UK, were asked about their cashflow management by REC in an online survey. The respondents’ top suggestions to ease cashflow pressures:

• Changes to National Minimum Wage and National Insurance rules to help ease cashflow pressures - 56%
• Faster payment terms from clients - 32%
• Targeted government support (e.g. tax relief, grants) - 23%
• Improved forecasting tools or financial training -14%
• Sector-specific guidance on cost management - 9%
• Greater access to flexible finance options - 8%

The survey shows 41% of recruitment firms rely on external finance, with another 7% likely to turn to it over the next year. One in five agencies depend on external finance or credit just to manage day-to-day operations. This cashflow survey was completed in collaboration with Bibby Financial Services.

Neil Carberry said:

“Recruiters have outlined how to ease cashflow pressures and thereby accelerate the industry. A thriving recruitment sector boosts clients’ productivity and profits, and adds £40 billion to the economy.

“The UK must enforce tougher overdue payment laws. Some suppliers of agency workers faced waits of up to 120 days last year. Delayed cashflow stops scaling, prevents investment and threatens the future of recruitment. The Bank of England must factor this real-world impact into interest rate decisions.”

Notes for editors

1.     The RISR report is available to read on the REC website for members only. It is available for non-members to purchase.

2.     The RISR report was an online survey undertaken by 186 recruiters from across the UK and of different sizes.

3.     Britain’s temporary labour market is working well for people, firms and the modern economy - with about one million temps working every day. Its success at bringing and retaining people in the labour force is vital to the new government’s central mission of driving growth. We are proud to share the voices of temporary workers - showing first-hand the impact temporary work has on the lives of individuals. These stories emphasise how important it is that employment regulation protects workers but does not stop people from accessing flexible work. The 'Voice of the worker' campaign is underpinned by our survey of 520 temp agency workers in Britain in June 2024, where we asked why agency work mattered to them.