Most directors I’ve spoken to recently regardless of sector they work in are approaching the upcoming Budget like a dental appointment – necessary to attend, unlikely to be pleasant, and you’ll probably leave with something expensive to fix.
October 30th. Mark it in your diary if you haven’t already.
Meanwhile, September’s figures from the KPMG and REC Report on Jobs mark the strongest permanent placement growth in four years. Two consecutive months of increases. Private sector vacancies rose for the first time since 2022.
Temporary billings grew, but at the slowest rate in five months. Temporary vacancies fell for the second month running.
Not quite a recovery. Not quite a downturn. Something in between that makes planning difficult and forecasting harder.
The market’s described as “flickering back to life” – which feels about right. Client confidence exists in moments rather than commitments. Hiring happens when it must, pauses when it can.
Permanent salary growth cooled for the first time in four months. Temporary pay hit a four-month low. Employers are containing costs. Candidates remain available – 43 consecutive months of rising permanent candidate numbers, though the pace has slowed to a three-year low.
The bigger recruitment firms are feeling the pressure differently. Hays reported a 3% decline in net fees for the quarter ending September, driven by a 7% drop in permanent hiring fees. In the UK and Ireland specifically, that decline hit 9%. Their response? Streamlining operations, divesting from several international markets, reducing consultancy staff by 14%, and pivoting toward higher-salary specialized positions less vulnerable to AI displacement.
That last point matters for agencies of all sizes.
What’s Driving the Split
The divergence between permanent and temporary isn’t random. There’s a pattern underneath.
National Insurance contributions rose in the latest Budget – employer contributions specifically. When the cost of hiring increases, businesses rethink their approach. Permanent headcount becomes a bigger commitment. Temporary cover looks more viable for managing uncertainty.
Well, not quite that simple. The data shows businesses aren’t just switching to temporary – they’re being more cautious across the board. Reed reported job vacancies dropped 13% between October and November, now 26% lower than a year ago. Some recruitment businesses are reporting clients pulling back from growth plans entirely, waiting to see how the increased costs affect their margins.
The regional picture varies. The North of England shows stronger growth momentum than other areas. London permanent placements remain resilient, though temporary billings saw an unexpected downturn.
Sector demand tells another part of the story. Permanent staff demand is strongest in IT & Computing and Engineering. Temporary vacancies only increased in Blue Collar, IT & Computing, and Nursing/Medical/Care sectors. Everything else either flat or declining.
Which creates an interesting challenge for agencies operating across multiple sectors or with mixed permanent-temporary books. The sectors driving permanent growth aren’t always the ones sustaining temporary demand. IT holds in both. Healthcare temporary remains solid. But if you’re placing in professional services or construction, the picture looks different.
Candidate availability continues to rise – driven by redundancies and fewer opportunities elsewhere – but the growth rate has slowed to a three-year low. More candidates available, but not flooding the market like earlier in the year. Employers have room to be selective, which extends hiring timelines and affects conversion rates.
The phrase industry experts keep using is “fragile recovery.” Energy prices and borrowing costs remain headwinds. The momentum exists, but it’s tentative. One policy shift or economic shock could reverse the trend.
The Cash Flow Reality Behind the Numbers
The market dynamics matter, but they hit different parts of your business at different speeds.
Permanent placements generate fees when someone starts. Straightforward enough. Temporary placements create a timing issue that’s always been there but gets sharper when the market’s uncertain.
Weekly payroll commitments before monthly client invoices settle. That gap exists whether you’re placing five temps or fifty, but the working capital requirement scales with volume. When temporary billings slow – even if they’re still growing – the ratio between cash going out and cash coming in tightens.
A Lancashire recruitment business we came across had been using the same invoice finance facility for four years. It worked. Cash arrived when invoices were raised. Payroll was covered. The issue? They’d overpaid by £32,000 across those four years. Not because the facility failed, but because they’d never reviewed whether the pricing remained competitive or the structure still matched how their business had evolved.
Four years is a long time in recruitment. Client mix changes. Permanent-temporary ratios shift. Temp volumes fluctuate with market conditions. The facility that made sense in 2021 doesn’t necessarily suit the operation in 2026.
Particularly now, when candidate supply outpaces demand and clients are taking longer to make hiring decisions. The time between placement and payment extends. Some agencies are seeing invoice settlement drift from 30 days to 45, sometimes 60, as clients manage their own cash flow pressures.
Which means the working capital requirement increases even if placement volumes stay flat.
Invoice finance can release funds against eligible invoices within 24 hours once a facility’s established. Setting up that facility typically takes 2-3 weeks. The structure depends on your ledger, customer concentration, and whether you want confidential invoice discounting or factoring with credit control support.
Well, it depends on several other factors too – contract terms, client credit quality, whether you’re funding payroll or growth or both – but those are the primary considerations.
The challenge we’re seeing more frequently: agencies whose current providers have announced strategic reviews or market exits. ABN AMRO ABL withdrew from the UK market. Other lenders have rationalized portfolios or shifted appetite away from certain sectors. When your provider gives notice, you’re suddenly looking for alternatives under time pressure rather than from a position of choice.
Transition costs matter. Early exit fees if you’re mid-contract. Time spent bringing a new funder up to speed on your ledger and clients. Disruption to cash flow during the handover period.
Better to review before you’re forced to. Especially in a market where having flexible access to working capital makes the difference between taking on new contracts or declining them because payroll timing doesn’t work.
What This Means for Planning Ahead
Predicting where the market goes from here isn’t straightforward. Most analysts aren’t calling it either way with confidence.
The permanent placement growth could build momentum if client confidence holds and both public and private sectors continue hiring. Equally, one policy shift or economic wobble could reverse the trend. The phrase “flickering” captures it – not extinguished, but not burning steadily either.
For agencies, that uncertainty makes the operational decisions harder. Do you hire another consultant based on two good months, or wait for three? Do you invest in expanding into a sector showing demand, or consolidate around what’s working?
The financial structure underneath those decisions matters more in uncertain markets than stable ones. When you can confidently forecast placement volumes and settlement timings, traditional funding works fine. When both are variable, having flexibility becomes valuable.
That applies to reviewing existing facilities as much as arranging new ones. The agencies that reviewed their invoice finance in the past six months – not because something was broken, but to understand what else was available – tended to find either better pricing or more suitable structures for how their business operates now versus when they last looked.
Sounds obvious, but.
The difference between reviewing from a position of choice versus reviewing because your provider’s given notice or your bank’s appetite has changed – that’s significant. Time pressure removes options. Having to explain your business to a new funder while managing weekly payroll and month-end invoicing creates unnecessary stress.
Most recruitment agencies haven’t reviewed their facilities in the past two years. Market conditions have shifted considerably since then. Client payment behaviour has changed. Your permanent-temporary mix has probably evolved. The lender landscape certainly has.
Whether now’s the right time to review depends on your specific circumstances. But knowing what’s available and how current arrangements compare – that costs nothing and sometimes identifies improvements worth considerably more than the time invested.
Frequently Asked Questions
Q: How long does it typically take to switch invoice finance providers? A: Setting up a new invoice finance facility typically takes 2-3 weeks, though this depends on how quickly you can provide the required documentation and how straightforward your ledger is. The actual transition – moving from one provider to another – adds complexity because you’re managing the handover while maintaining cash flow for payroll. If your current provider has given notice, you’re working to their timeline rather than yours, which removes flexibility.
Q: What happens if my invoice finance provider announces they’re exiting the market? A: You’ll typically receive notice periods ranging from 30 to 90 days, depending on your contract terms. During that period, you’ll need to find an alternative provider, complete their due diligence process, and arrange the transition. The challenge is that you’re one of many clients looking for alternatives simultaneously, which can affect available capacity with other lenders. Early exit fees may apply if you’re mid-contract, though some providers waive these in managed exit situations.
Q: Should I review my invoice finance facility if it’s working fine? A: Working fine and optimally structured are different things. A facility arranged three or four years ago reflected your business at that point – your client mix, permanent-temporary ratio, volumes, and the lender market conditions then. If any of those have changed significantly, there may be better pricing or more suitable structures available now. A review costs nothing and sometimes identifies considerable savings, like the Lancashire agency that had overpaid £32,000 across four years.
Q: How does the current market uncertainty affect invoice finance eligibility? A: Lenders look at your customer base, invoice ledger quality, and contract terms more than market conditions generally. However, if your clients are in sectors experiencing particular pressure, or if you’re seeing payment terms extending beyond agreed credit terms, that can affect both eligibility and advance rates. Some lenders have tightened criteria around customer concentration or specific sectors, while others have maintained appetite. It varies by provider.
Q: What’s the difference between invoice finance for permanent versus temporary recruitment? A: Permanent placements generate single invoices when candidates start, typically on 30-day terms. Temporary placements create ongoing weekly or monthly invoices for the same clients. The working capital requirement for temporary is more predictable but constant – you’re funding payroll before client payment regardless of placement volumes. Most invoice finance facilities cover both, but the structure and pricing may differ based on whether you’re primarily permanent, temporary, or mixed.
About Andy Bissett
Andy Bissett founded Shadowfax Funding Solutions after more than 20 years in commercial banking, including specialist roles in invoice finance at RBS, Yorkshire Bank, and Aldermore. He works with recruitment agencies and other businesses navigating funding decisions, providing access to multiple lenders while acting as what he calls a “virtual bank manager” – understanding the business context before recommending solutions. If you’re reviewing your current facilities or exploring options, contact Andy at hello@shadowfaxfunding.com or 0113 5182253.