Recruitment Finance in a Cooling UK Jobs Market: What Start-Up Agencies Need to Know Going Into 2026

The UK labour market is shifting once again and for recruitment agencies, particularly start-ups and scaling firms, these shifts have very real operational consequences. The latest KPMG and REC, UK Report on Jobs survey, compiled by S&P Global shows a market that remains subdued, with weaker hiring activity, falling vacancies and rapidly rising candidate availability. For agencies whose cashflow depends on consistent billing cycles, this environment demands sharper financial strategies and greater protections.
That’s where recruitment finance, recruitment factoring, and comprehensive bad debt protection becomes essential tools rather than optional add-ons.

The November UK jobs market: Cooling, but stabilising

The November KPMG and REC, UK Report on Jobs survey, compiled by S&P Global1 highlights several key trends every UK recruiter should be aware of:
Permanent hiring remains weak
The Permanent Placements Index sat at 45.5, signalling another month of contraction. Although the decline was the slowest since July 2024, recruiters cited Budget uncertainty, reduced client confidence and increased staffing costs as reasons for delayed or cancelled hiring decisions.

Temporary recruitment dipped again

After October’s slight uptick, temp billings fell back into contraction at 48.8. The Midlands saw strong growth, London saw marginal growth, while the South and North declined.

Vacancies continue to fall but at the slowest rate in five months

The Total Vacancies Index rose to 43.9, which still signals falling demand, but a slower rate of decline than earlier in the year. Permanent vacancies are falling more sharply than temporary roles.

Candidate availability is soaring

The Total Staff Availability Index hit 66.5, the second-fastest rise since late 2020, driven by redundancies and fewer open roles. Both permanent and temporary availability rose sharply.

Pay trends remain mixed

• Permanent salaries saw their fastest rise since June, as employers competed for high-value skills.
• Temp pay stagnated, with regional differences across England.
In short: Demand is tightening, supply is expanding, and employers are cautious. Cashflow across agencies becomes unstable quickly in this environment, especially for those relying on temp or contract income.

Why this market is difficult for start-up recruitment agencies

Fewer placements = unpredictable cashflow

Permanent placements have been declining for more than two years, and temporary demand is fluctuating month to month.

Clients are delaying decisions

According to the survey commentary, many employers paused new hiring due to uncertainty around the Budget and a challenging trading environment.

Increased candidate supply intensifies fee pressure

When candidates are abundant, agencies compete harder to win and fill roles and in turn, eroding margins.

Temp payroll becomes riskier

Contractors and temps typically be paid weekly or fortnightly, even when clients delay payment. Without recruitment finance, start-ups often cannot safely scale their contractor base.

Harder negotiation on payment terms

In a more competitive landscape, end clients are increasingly reluctant to agree to shorter payment terms, making cashflow planning even more critical for agencies.

How recruitment finance helps agencies stay resilient in a weaker market

Recruitment finance, particularly factoring and invoice finance, converts invoices into upfront cash. This is especially valuable when temp payroll is due long before client invoices are paid. Key benefits in the current market:

• Immediate cashflow stability
Eases the volatility caused by falling placements and slower client payment cycles.
• Protects weekly contractor payroll
The ability to fund temps reliably is a major competitive advantage when permanent hiring is slowing.
• Enables growth despite market contraction
If you want to take on more temps or win bigger accounts, finance removes the cashflow ceiling.
• Reduces admin burden
Factoring with integrated back-office support (credit control, timesheets, payroll) frees up recruiters to focus on sales and delivery and not having to chase debt.

Protecting your agency: Bad debt protection

In a market where both permanent and temporary hiring are under pressure, the risk of client insolvency or non-payment becomes significantly higher and the latest data supports that concern. According to The Insolvency Service, there were 2,029 registered company insolvencies in England and Wales in October 2025, which represents a 17% increase compared with October 2024, and a 2% month-on-month rise.²

This isn’t an isolated spike. Earlier in the year, May 2025 recorded 2,238 company insolvencies, up 15% from May 2024, reflecting a sustained upward trend in business failures across the UK.³
Industry analysts now warn that if these rates continue, more than 24,000 UK businesses could fail during 2025, making it one of the most challenging years for corporate stability since the financial crisis. This escalating insolvency environment directly increases financial risk for recruitment agencies, whose invoices often sit on 30–90-day terms, while weekly contractor payroll must still be met.⁴

For agencies operating in sectors where clients are tightening budgets, restructuring or experiencing cashflow pressures, the probability of a client failing to pay or collapsing entirely, is materially higher. When you combine this trend with falling vacancies and increased redundancy activity shown in recent labour-market data, it becomes clear why protecting your ledger is no longer optional.
This is exactly why robust bad debt protection, such as QUBA’s Allianz-backed cover, is so critical in 2026: it shields agencies from the fastest-rising source of financial risk in the current market, client insolvency.
QUBA strengthens its recruitment finance solution with Allianz-backed Bad Debt Protection, which covers 90% of an agencies insured debt. This ensures you can grow your client base and scale contractor numbers with confidence.

The bad debt protection at a glance:

• 90% coverage on approved outstanding invoices in the event of insolvency – If a client becomes insolvent, Allianz reimburses 90% of the insured amount (provided the required processes are followed). For example: With a £55,000 insured limit, your maximum financial exposure is just £5,500.
• Unlimited credit checks through CreditSafe and Allianz – All new clients are vetted, helping you make informed decisions before trading begins.
• Tailored credit limits to suit each client – We secure the most appropriate limit based on the client stability and anticipated billing, including discretionary limits of up to £20k (dependent on credit check).
• For clients requiring more headroom than Allianz initially approves – We can apply CAP, allowing us to increase your approved limit, up to double the original level. This is ideal for growing accounts where exposure would otherwise exceed standard insurance.
• Continuous monitoring and 100% claims paid – Allianz monitors client risk daily. If risk increases, limits may be adjusted, but any debt accrued prior to a withdrawal stays insured as long as trading remained within the approved limits. To date, every claim managed through QUBA has been paid.⁵

Important context: what happens with non-payment (not insolvency)

While Allianz insurance protects against formal insolvency, non-payment due to delay or dispute is handled differently. This is where QUBA’s support becomes critical.

• Our proactive credit control spots issues early, giving us time to act before a payment becomes a problem.
• If a client can’t pay (but isn’t insolvent), we handle the legal recovery process, focusing on resolution without unnecessary escalation.

This approach protects your agency’s relationships while ensuring that overdue invoices are addressed promptly and professionally.

Why this matters in today’s market

With:
• falling permanent hiring,
• volatility in temp billings, and
• rising candidate supply due to redundancies,
…client insolvency risk grows. QUBA’s Allianz-backed protection ensures your cashflow and your agency’s future, are safeguarded while you scale.

What the S&P report reveals about 2026 opportunities

Sectors showing resilience:

• Nursing, Medical & Care (the only temporary category to increase in November)
• Engineering & Blue Collar (milder declines)
• Secretarial/Clerical & Accounting/Financial (softer reductions)

Skills shortages persist

Despite market cooling, employers continue to struggle to fill specialist roles in engineering, AI/ML, cyber, technical fields, healthcare and more.

Candidate-rich market = quicker fills when demand returns

As staff availability surges, stable agencies will be best placed to capture the hiring rebound in early 2026.

Preparing your agency for Q1 2026

Secure a flexible recruitment finance solution before January hiring spikes

The report notes that January decisions will be crucial to market recovery.

Build your contractor base confidently

With temp hiring more stable than permanent hiring, finance ensures you can pay workers on time every time.

Prioritise industries that hold steady during slowdowns

Healthcare, engineering, blue-collar, administrative and technical roles offer stronger demand.

Protect yourself from insolvency shocks

Bad debt protection cover dramatically reduces your exposure if a client fails.

Ashley Lyas, Director, QUBA Solutions comments:
“Cashflow is the lifeline of every recruitment agency, but true resilience comes from controlling risk. In a market where client behaviour is harder to predict, our Allianz-backed Bad Debt Protection gives founders the confidence to grow without worrying about insolvency shocks. When 90% of your exposure is covered, you can scale your contractor base, win larger accounts and push for growth even while the wider market slows.”

Conclusion: A tough market rewards agencies with strong cashflow strategies

The UK recruitment market remains challenging, but not hopeless. The S&P compiled data shows early signs of stabilisation. Agencies that strengthen their financial resilience now will be best positioned to grow when demand rebounds. Recruitment finance, recruitment factoring and robust bad debt protection are no longer optional for start-up and scaling agencies. They are essential tools for sustainable, confident growth.

Sources:

¹ November’s KPMG and REC, UK Report on Jobs survey, compiled by S&P Global

² The Insolvency Service — Company Insolvency Statistics, October 2025 (GOV.UK)

³ The Insolvency Service — Company Insolvency Statistics, May 2025 (GOV.UK)

⁴ PWC June 2025 insolvency data

⁵ Based on QUBA data October 2025