Recruitment forecasts for 2026 – what it means for Defence Technology, Engineering, Aviation, Business Support and contractor talent

Last November's Budget signalled a shift in priorities for the Chancellor of the Exchequer, focusing on growing the economy, reducing the cost of living, and securing Britain's economic stability. Since then, however, the number of payrolled employees has fallen by 113,000, there are 115,000 fewer vacancies, and the unemployment rate is running at 5.1%. Businesses are dealing with increased taxes and employment costs, including business rates and National Insurance contributions, investment levels are down, and inflation remains high. For organisations hiring across sectors such as Defence Technology, Engineering, Aviation, and Business Support, it’s proving to be a testing time.

However, there is cautious optimism on the horizon for 2026. The Bank of England expects to reduce the Base Rate to 3.5%. The economy is set to grow by 1.4% this year, and around 13% of businesses reported an increase in their turnover towards the end of 2025.

In the face of these challenges, we examine what the current environment means for Defence Technology, Engineering, Aviation, and Business Support businesses, and how it will affect contractor talent.

Defence Technology

Last June’s Strategic Defence Review – Making Britain Safer: secure at home, strong abroad, committed the UK to spend 2.5% of GDP on defence, with plans to increase that figure to 3% in the next Parliament, promised a new partnership with industry and a radical reform of procurement processes. In a world where there are currently 10 international armed conflicts, 4 military occupations, and 35 non-international armed conflicts, Britain's defence manufacturers saw record exports last year, amounting to £20 billion. 

This marks a clear change from policy to programme delivery and, as Alex Froude, our Director of Recruitment, Engineering, notes, will ‘intensify demand for specialised, security-cleared engineers and project leaders’. New technologies, such as AI and robotics, are transforming the sector and driving demand for specialists in those areas, as well as systems engineers, software and cyber specialists and project control professionals, and new deals such as the UK’s largest ever warship export agreement and largest fighter jet sale will exacerbate skills shortage pressures.

‘However,’ Alex notes, ‘long procurement cycles and limited talent pools mean that competition for talent will remain fierce, particularly for contractors, and will drive continued pressure on rates and retention challenges for employers upwards.’ Employers also face challenges sourcing suitably qualified talent with the correct security clearance, dealing with lengthy onboarding processes, and navigating multiple talent options, all of which affect how quickly they can source talent.

In 2026, contractors will still play a critical role in delivering defence engineering projects. Still, employers will need to plan their workforce strategies in good time and more strategically if they are to secure the levels of expertise that they need.

Engineering

The UK’s Modern Industrial Strategy was presented to Parliament in November 2025 and promises funding for skills and training to encourage high-growth investment. The recent announcement of a £45 billion rail investment between Liverpool and Manchester, as well as improved connections across the North West, is part of the government’s Northern Powerhouse Rail programme, designed to offer the ‘biggest travel upgrade in the North in a generation’. Other major infrastructure projects include: 

• The Lower Thames Crossing, which has recently been awarded £590 million and is expected to begin in 2026
• The Euston Station redevelopment, the UK’s largest rail infrastructure programme, is designed to link London with other major UK cities
• Universal Studios Great Britain in Bedfordshire, featuring immersive rides, themed lands and a 500-room hotel, is scheduled to begin this year.

Clean energy investment, as set out in the Clean Energy Jobs Plan, which promises 400,000 additional jobs by 2030, plans to decarbonise the UK power system by 2035 and the Advanced Manufacturing Sector Plan, which concentrates on batteries, aerospace, space, advanced materials and agri-tech and which will have its funding doubled to £39 billion by 2025. All these initiatives require a highly skilled workforce, presenting, yet again, challenges for organisations that need to recruit specialists in mechanical, electrical and manufacturing engineering.

Alex Froude commented, “To counteract the prevalence of skills shortages throughout engineering and particularly in clean energy, electrification and advanced manufacturing, organisations should be embracing skills-based hiring, regionally focused hiring strategies, internal development programmes and more vocational routes into the sector.”

He added, “Many of our clients are continuing to favour contractors to support the flexibility they need for the large infrastructure and green-energy projects they’re involved with. 2026 promises continued growth in contract and project-based roles, with many commanding a premium for emerging or hybrid skills that combine traditional engineering capabilities with expertise in digital or sustainability. ” 

Aviation

The UK’s aviation and aerospace sectors contribute around £25 billion to the economy, employ over 240,000 directly and many more indirectly. Some analysts predict significant growth in the aviation sector, around 7.5% in 2026, in response to renewed passenger traffic after the COVID-19 pandemic, a rise in the number of low-cost carriers, and increased air freight. In the UK aerospace industry, which is the world’s second-largest, demand for commercial and defence aircraft continues to grow but remains constrained by skills shortages and supply chain issues. 

A significant feature of 2026 will be sustainability, particularly in hydrogen and electrification, as well as the industry’s increasing use of sustainable aviation fuels (SAFs) and the growth of hybrid-electric and fully electric technologies. 

CBSbutler’s Director of Recruitment, Aviation, David Rowe, commented, “Aviation and aerospace are among the UK industries with the greatest growth potential for 2026, but still face significant challenges, including access to funding and talent constraints. Projects such as Heathrow’s Third Runway expansion and those led by the Aerospace Technology Institute, which plans to double the UK’s share of the global aerospace market to $18 billion by 2025, reinforce the contribution of the sector but also highlight the limitations it faces in terms of the number of skilled professionals that are available for employers. Shortages of maintenance, repair, and operations (MRO) professionals, systems engineers, avionics and experts and compliance specialists are likely to influence how aviation and aerospace employers strategise their workforce plans during the coming year, creating a reliance on contractors and interim specialists to support growth.”

Business Support

Business Support professionals will have to deal with changing legislation and increasing regulatory scrutiny in 2026, in response to the government’s Budget. Most notable among them are:

• The Employment Rights Act which brings reforms to Statutory Day-One Rights, such as sick pay and paternity leave
• Unfair Dismissal Qualifications which now come into force after six months’ employment
• Zero-hours and Contract Reforms which include the right to request guaranteed hours 
• The Fair Work Agency which requires updated and compliant contracts and HR procedures
• Minimum Wage Increases which will come into effect in April of 2026.

However, perhaps the most notable change is to be found in legislation relating to Umbrella Companies, which will affect end-clients, contractors, and recruitment agencies, and is designed to tackle non-compliance. Coming into effect in April 2026, the new rules place the responsibility for PAYE at the door of recruitment agencies and end-clients, not contractors, in an effort to protect them from unscrupulous umbrella companies. 

That means more emphasis on agencies using a restricted or preferred supplier list with accreditation (such as the FCSA, SafeRec, Professional Passport, etc.), avoiding anything that resembles a loan arrangement or inflated expenses, updating contracts to reflect compliant PAYE responsibility, audit rights, and indemnities, and demonstrating ongoing diligence.

Allison Drake, our Director of Recruitment, Business Support, commented, “From April 2026, umbrella tax risk flows up the chain. If PAYE isn’t paid, someone will pay, and HMRC gets to choose who.”

What this means for hiring in 2026

If 2025 was about setting a course, then 2026 is likely to be about delivering, albeit under constraint. Investment in defence, engineering and technology is inevitable in the current climate. Still, the labour market will continue to be shaped by skills scarcity and is unlikely to deliver large-scale hiring surges. 

Alex Froude summarises, “Overall, 2026 will reward workforce strategy over speed. Employers that invest early in talent pipelines, offer flexibility and align hiring plans with long-term programme delivery will be best placed to compete.”

For employers across the defence, engineering, aviation and business support sectors, the new year will undoubtedly present opportunities. Still, they must be prepared to plan, adapt to a new global landscape and design their workforce strategies to compete intelligently for the talent that will drive success in 2026.

For contractors, especially those with security clearance and niche skill sets, 2026 is set to be a year of continual demand, with the opportunity to work on some of the most exciting and innovative projects in the UK.

To learn how CBSbutler can support your Defence Technology, Engineering, Aviation and Business Support functions, contact us.