UK employers' confidence in hiring and investment improved by six percentage points between June and August 2026, but the measure still sits in negative territory at -8%, according to the Recruitment and Employment Confederation's latest JobsOutlook survey.

The finding lands less than a month before Chancellor John Healey delivers his first Budget on 28 October, and it touches directly on workforce planning decisions: whether to open permanent roles, extend temporary contracts, or hold headcount flat until fiscal policy becomes clearer.

The REC's numbers also track a wider pattern of pessimism. Employers' perceptions of UK economic performance improved by eight percentage points over the same period, yet remained at -39% compared with the previous quarter. The REC figures echo the CBI's latest outlook survey, published in September, which recorded negative hiring intentions continuing a trend that began in July.

Permanent and temporary outlooks diverge

The short-term outlook for permanent hiring stood at +8%, one percentage point lower than the April-to-June 2026 reading. Employers in the north of England and the Midlands reported more optimism than the national average.

The medium-term permanent outlook weakened further, declining four percentage points to +6%. In the Midlands, however, the figure reached +12%.

Temporary hiring told a different story. The short-term outlook came in at +2%, while the medium-term outlook held steady at +5% for the fourth consecutive quarter. Medium-sized businesses expressed the most optimism about their temporary hiring intentions.

For HR leaders, the split suggests a continued reliance on contingent labour where permanent commitments feel risky — a dynamic with implications for agency partnerships, compliance planning and skills pipelines.

REC: 'Mistake improvement for recovery'

Maxine Bligh, interim chief executive of the REC, cautioned against reading the uptick as a turnaround in the run-up to the Budget.

"A strong labour market is fundamental to delivering sustainable growth, and the chancellor has the chance to create better conditions for growth in his first Budget," she said.

"Businesses have said loudly and consistently that employers need action to reduce non-wage costs. A phased restoration of the National Insurance threshold would make a real difference to employers."

Bligh also called for greater investment in childcare, healthcare and transport infrastructure, alongside reform of the growth and skills levy to support shorter, targeted training programmes.

Zero-hours rules pose recruitment risk

The REC has urged the government to exempt recruitment agencies from upcoming changes to zero-hours regulations. The new rules will require employers to guarantee a certain number of hours and provide better notice of shift scheduling.

"Reducing the ability of firms to use temporary agency workers kills off a crucial route into work for thousands of young people not in education, employment or training," Bligh said.

"We hope to see more engagement with business to review proposals ahead of the government's final response to the consultation. That is the approach that will help deliver results for job seekers and tax returns for the government to invest in public services."

For employers using agency staff, the consultation outcome will shape scheduling obligations and cost structures well beyond the Budget itself. HR teams that rely on temporary labour will need to watch the government's final response closely, since guaranteed-hours requirements could reshape how shift-based workforces are structured.

With hiring sentiment improving but still negative across every economic measure, the REC's message to both employers and the Treasury is clear: the pre-Budget gains are fragile, and policy decisions on National Insurance, skills funding and zero-hours rules will determine whether confidence continues to climb or stalls through the autumn.