Can we make predictions for the year ahead in a particularly unpredictable climate? Charlie Ball, Prospects Head of Labour Market Intelligence, offers expertise.
It’s never easy to make predictions, but 2026’s volatile start has reminded us that it’s particularly tricky right now.
I make predictions every year (you can check out how my 2025 predictions went), so let’s see what I think are going to be the things recruiters need to know for the 2026 graduate labour market.
The talent pool will remain tight - but not for the reasons you think
ISE data shows that 2025 doesn’t seem to have been catastrophic for graduate recruitment and we’ll have further insight to this when the Graduate Outcomes data is out in a few months.
While it was the toughest market since Covid, much of that reflected the labour market finally aligning with our sluggish economy after years of overperformance. Early 2025 saw decline, followed by autumn stabilisation. However, if economic headwinds hit early 2026, expect further softening.
What this means for recruiters
The UK economy remains anaemic, and graduate recruitment will mirror this throughout 2026. That, however, doesn’t mean that there’s going to be a huge number of desperate graduates on tap in the jobs market.
Job creation numbers actually remain quite strong, and issues with the recruitment landscape (see below) mean that it isn’t necessarily going to be easy to find the right candidates.
Graduate Outcomes data will show continued deterioration
When spring 2026 brings new Graduate Outcomes data for 2023/24 graduates, expect What do graduates do? to report higher early unemployment, reduced professional-level employment, and increased postgraduate study enrolment.
This continues the downward trend from previous years and affects how you should think about quality metrics and time-to-hire.
What this means for recruiters
This is more of a long-term issue. The next couple of years are going to see an unusually large number of 18-year-olds leaving school and going into work or continuing education. But after that, numbers will fall steadily for many years.
If your business relies on talent with high formal education, be that university, college or other options, you’re about to experience the largest potential candidate pools you’re ever likely to get.
If young people are deterred from going to university, and we see lower numbers of university entrants in the next couple of years, the UK may be locked into that cycle for the foreseeable future and business needs to prepare talent plans accordingly.
AI's economic impact remains uncertain - but prepare for volatility
2025 ended like 2024, with data from the US showing that predicted mass replacement of entry-level roles hasn't materialised.
Change seems to be happening slowly and incrementally. Yet the financial pressure is mounting: trillions invested in AI with underwhelming returns. 2026 is likely the year something gives - either a genuine breakthrough or a significant market correction.
In an interesting parallel, for the last few years I’ve used various AI tools on my predictions and other reports to see if it comes up with anything genuinely useful or insightful. This year is the first time an AI model (Claude, in this case) has produced anything helpful - doing a good job of headings and framing key points. On the other hand, it made a complete hash of the next section. Sadly, I don’t think I can sit back and let the magic robots do their thing just yet.
What this means for recruiters
Build flexibility into your 2026 hiring plans. If the AI bubble bursts, recession will follow, dramatically impacting budgets and headcount. If breakthrough happens, certain roles may genuinely become redundant or transform rapidly. Either scenario demands agility. Things are very uncertain.
AI has disrupted application systems and there is no easy fix
AI-powered application tools have removed friction for candidates. Previously, uncommitted applicants wouldn't complete lengthy applications. Now, tools are available to generate applications at the touch of a button, creating submissions that are polished and professional, and that look identical to genuinely engaged candidates.
What this means is that application volumes have surged, key metrics like cost-per-hire and time-to-hire have increased as sifting becomes more resource-intensive, quality of shortlisted candidates hasn't improved, to say the least, and already-stretched budgets are under tremendous pressure.
And on the other side of the equation, candidate experience has deteriorated as odds feel increasingly impossible and applicants are demoralised.
What this means for recruiters
No consensus solution exists yet, and 2026 won't resolve this. Old, tried and tested face-to-face techniques do still work even if they’re resource-intensive.
Notably, apprenticeship hires went up last year. This may be because systems became easier, but also from the simple point that bringing apprentices in means you’re bringing in real people who are engaged with your business.
Of course, that doesn’t mean hiring them is without challenges. More employers are looking at engaging directly with education providers and considering cutting out the wider recruitment market that seems more vulnerable to AI-reliant candidates.
However, also remember that candidates using AI are often those least confident or experienced, and so engagement with candidates and institutions to build awareness and boost trust may also be effective.