In 2023, an average of 1,058,300 temporary or contract workers were on assignment daily across the UK, marking an 8.4% increase from 976,400 the previous year, according to the Recruitment Industry Status Report (RISR) published by the Recruitment & Employment Confederation (REC).

The REC report covers 2023/2024 and is gathered based on the final performance of firms in their last full financial year.

It found that, even though the estimated 22.6 million temporary or contract placements in 2023 was 12% down compared to 2022, the number of temps or contract workers on assignment on any given day is offset by the increased length of assignments – which grew from an average of 15 weeks in 2022 to 22 weeks in 2023.

The REC said this reflects the tendency of businesses to rely more on temporary labour in times of economic and political uncertainty, as well as the choice that individuals are making for flexible work.

Meanwhile, the number of recruitment agencies held steady across the UK, with less than 1% rise and fall in the regions and nations. There was growth in the wider talent sector, offering different services to clients or employment businesses, the report noted.

At the beginning of 2024, an estimated 31,247 enterprises were operating in the UK recruitment industry. This was up by 5.4% on the equivalent figure at the start of 2023, which stood at 29,635. This marks the first increase after four consecutive years of decline.

There was also a 1.9% increase in people employed in the sector between 2022-2023.

Neil Carberry, REC Chief Executive, said in a press release, “The last year has been a difficult one for the recruitment industry with clients holding back while they awaited lower inflation and interest rates, an election and the right signals on growth. While the demand for permanent roles was strong as we exited the pandemic, figures now reflect a lull in demand as we wait for the economy to find its footing.”

“The industry made an estimated 806,400 permanent placements in 2023, up 14.7% on the 703,000 in 2022,” Carberry added. “Pre-pandemic, recruiters were making an average of one million perm placements a year.”

“In an uncertain and, at times, strained year for recruiters and the economy as a whole, the sector’s GVA (gross value added) in 2023 was still impressive at £44.4 billion in 2023,” Carberry continued. “Despite this huge contribution to the economy, in real terms, the number is down 7.3% compared to 2022. Our market forecast for temporary staffing in 2024 points to a wide range of experience, although almost all firms have been under pressure.”

In 2023, the largest proportion of permanent placements via a recruitment business was concentrated in the secretarial/clerical (18%) and technical/engineering (16%) sectors, indicating sustained demand for both administrative and technical expertise. At the same time, in 2023, temporary placements, by contrast, were led by other industrial/blue-collar (18%) and nursing/medical (15%).

Despite concerns from ministers about the costs of the NHS using agencies, the report finds that, for the temporary placement sector, nursing and medical care accounts for 15% of assignments.  Revenue market share for nursing and medical care falls to 13%, suggesting that the margin for these placements is relatively low.

Further data showed that a predominant area of AI usage is in job description creation, with 90% of recruiters reporting their use of AI tools for this purpose. This suggests that organisations are leveraging AI to craft compelling job postings that attract the right candidates, optimising their recruitment strategies from the outset.

Furthermore, while AI applications extend to CV screening (39%) and talent sourcing (32%), there is a noticeable decline in its use during later stages of recruitment, such as onboarding (7%) and interview analysis and insights (5%).

Among recruitment businesses, 68% said that the inability of AI tools to identify interpersonal skills was one of its biggest limitations, 60% cited AI’s inability to identify soft skills as a limitation, 38% said it is difficult to assess transferable skills, 25% said a limitation is a possible bias in candidate selection and 21% said a limitation is data privacy and security concerns.

Carberry said, “AI has the potential to transform recruitment, streamlining processes and improving decision-making. But it cannot replace the human touch. Recruiters bring empathy, judgement and a deep understanding of candidates and clients; qualities that AI simply cannot replicate.”