As we enter 2026, Rialto analysts examine the evolving executive landscape across UK and European markets. The data confirms we are not experiencing a cyclical downturn but a fundamental recalibration of executive value. Traditional management hierarchies are being compressed, generalist roles are disappearing and leaders are expected to demonstrate immediate impact in constrained environments.
This quarter’s insight examines UK and EU broader economic forecasts to support organisational planning and decisions, executive market dynamics and the capabilities driving demand in an increasingly selective hiring landscape.
It finds some resilience, pockets of dynamic growth and room for cautious optimism amid continuing uncertainty, the near-constant flow of global shocks and GenAI-driven disruption.
The UK economy grew 0.3% in November 2025, marginally higher than economist predications and rebounding from a 0.1% contraction in October. For the three months to November, GDP increased just 0.1%, with services up 0.2%, construction down 1.1%, and production declining 0.1%. The Office for Budget Responsibility forecasts GDP growth of 1.4% for 2026, down from 1.9% projected in March, reflecting weaker productivity expectations. KPMG’s outlook is more cautious, projecting 1.0% growth, while the Treasury’s survey of independent forecasters averages 1.1% for 2026.
Inflation is easing toward the Bank of England’s 2% target. The Consumer Price Index rose by 3.2% in the year to November 2025. KPMG expects inflation to return to target by April 2026, supported by measures announced in the Autumn Budget, including energy bill reforms projected to save households £150. The base rate currently sits at 3.75%, with market pricing indicating further cuts to 3.25% by year-end, though the pace of reduction is slowing as the Bank approaches neutral policy settings.
Fiscal space remains severely constrained. Debt servicing now consumes approximately 10% of government spending, the highest proportion since the 1980s. Public sector hiring contracted 3.2% year-on-year, and procurement budgets for external consultancy and interim leadership have been reduced across Whitehall. The OBR’s November forecast confirmed the government faces limited room for stimulus, with the tax-to-GDP ratio projected to reach 37.7% by 2027-28, a post-war high.
Retail: The retail sector enters 2026 facing acute margin pressure. Retail sales volumes rose 0.6% in the three months to November 2025, with clothing stores and computer retailers performing strongly, but the sector confronts mounting costs. The British Retail Consortium estimates that increases to National Insurance contributions (from 13.8% to 15.0%) and the National Living Wage will cost the sector £5 billion annually. PwC’s Retail Outlook notes that 81% of retailers plan to increase prices to offset these challenges, squeezing consumer demand. Executive hiring in retail has softened accordingly, with demand concentrated in transformation roles focused on cost optimisation and omnichannel integration. Executives in consumer-facing sectors must demonstrate cost discipline or face obsolescence.
Manufacturing: UK manufacturing showed tentative recovery in December 2025. The S&P Global UK Manufacturing PMI rose to 50.6, the highest reading in 15 months. However, the expansion was driven primarily by inventory building and backlog clearance rather than sustained demand growth. Manufacturing employment declined for the 14th consecutive month. Export orders contracted for the 47th consecutive month in December, reflecting weak global demand and continued impact from US tariffs.
The sector’s recovery remains fragile, dependent on domestic demand and vulnerable to external shocks. Executive demand in manufacturing is concentrated in operational turnaround roles, supply chain resilience and automation deployment.
Construction: Construction output fell 1.1% September to November, the largest quarterly decline since March 2023. However, infrastructure remains resilient, with output reaching £9.93 billion in Q3 2025, up 4.2% from Q2. Roads and electricity infrastructure drove growth, up 30.2% and 28.2% respectively, supported by government commitments to energy transition and public infrastructure. Executive demand in infrastructure and renewable energy projects command premiums for project delivery leaders, while residential and commercial segments face headwinds.
Financial services enters 2026 in strategic recalibration. Higher-for-longer interest rates support net interest margins, but credit conditions tighten and loan growth slows. Capital markets activity remains selective, with restructuring and private credit robust while IPOs. Regulatory pressure on capital adequacy, consumer duty and operational resilience increases costs sector-wide.
Executive demand softens in growth roles but remains resilient for risk, regulatory change, cost transformation and balance sheet optimisation. Credibility with regulators and execution discipline now outweigh expansion narratives.
Technology shows renewed revenue momentum but persistent hiring caution. Enterprise spending on AI, cloud optimisation and cybersecurity remains strong, while discretionary transformation budgets tighten. Investment shifts from broad growth to targeted productivity improvements.
Executive demand concentrates in roles bridging technology and commercial outcomes: AI governance, platform rationalisation, data architecture and value realisation. Boards increasingly prioritise executives who can industrialise AI over pure innovation leadership.
Healthcare faces sustained structural pressure. Public systems struggle with workforce shortages, aging populations and constrained funding. Private healthcare and life sciences navigate higher financing costs and elongated investment cycles. Pharmaceutical pipelines remain active.
Executive hiring targets leaders in workforce transformation, operational performance and regulatory navigation. Digital health attracts interest but adoption varies. Executives translating innovation into scalable, compliant, cost-effective models command premiums.
Energy shows strong investment momentum but rising execution risk. Grid infrastructure, renewables and energy security attract capital, but project delivery constraints – planning delays, skills shortages, supply chain bottlenecks – are constraining the sector.
Leaders with proven large-scale programme delivery, stakeholder management and regulatory navigation are in highest demand. Boards prioritise managing political, community and commercial complexity while maintaining delivery discipline above technical expertise.
Private equity operates in a disciplined, execution-led cycle phase. Deal volumes remain below peak, constrained by valuation gaps and financing costs, but activity recovers in sectors with clear cash flow visibility. Value creation shifts decisively from financial engineering to operational improvement.
Executive demand within portfolio companies remains strong but selective. Operating partners, interim CEOs and functional leaders with restructuring, integration or rapid performance improvement are valued while executives can expect to be placed under unprecedented levels of scrutiny.
The UK unemployment rate reached 5.1% in the three months to October 2025, the highest since March 2021. Total unemployment rose by 158,000 from the previous quarter to 1.83 million. Employment fell by 16,000 to 34.23 million, marking the second consecutive quarterly decline. The employment rate dropped 0.3 percentage points to 74.9%.
Vacancies fell to 717,000 in September to November 2025, down 9.6% annually and now below pre-pandemic levels. The ratio of unemployed people per vacancy rose to 2.5. The steepest drops in executive hiring occurred in generalist COO and commercial director positions.
Yet this tells only half the story. While overall volumes contract, the nature of available roles has shifted. Three trends dominate:
A Surge in Interim Executive Placements: Companies increasingly seek rapid restructuring capability over institutional knowledge, turning to interim executives who can quickly evaluate financial controls and implement transformation initiatives.
AI-Driven Organisational Flattening: According to Gartner’s 2025 workforce predictions, 20% of organisations will use AI to flatten their structures, eliminating more than half of current middle management positions by 2026. This represents elimination of coordinative roles which are being displaced by autonomous agents and workflow systems.
Adaptability as the Critical Hiring Filter: The most significant shift in executive assessment is the prioritisation of learning agility and technology fluency over traditional credentials. Research from executive search firms indicates that emotional intelligence and adaptability now rank as top predictors of leadership success, particularly during periods of change. This technological transformation demands executives who can rapidly absorb, deploy and govern emerging technologies. Multiple 2025 recruitment reports confirm that boards increasingly favour candidates demonstrating AI fluency, change management abilities and cross-disciplinary thinking over those with purely sector-specific experience.
This represents a fundamental revaluation of executive currency. Tenure and domain expertise, once premium assets, are now basic requirements at best and liabilities at worst if they signal rigidity.
Despite broader contraction, specific niches show robust executive demand:
Energy Transition and Infrastructure: The UK’s commitment to 50GW of offshore wind capacity by 2030 continues to drive hiring in engineering and project leadership.
Governance, Compliance, and Sustainability: The EU’s Corporate Sustainability Reporting Directive entered full enforcement in January 2026, affecting approximately 50,000 companies. Demand for Chief Sustainability Officers and compliance-focused finance executives has surged accordingly, as reported by PwC’s CSRD Readiness Survey.
Digital Infrastructure and Cybersecurity: The UK’s National Cyber Strategy and increased investment in sovereign cloud infrastructure have created sustained demand for CISOs and technology risk executives.
Executive pay growth is cooling but becoming more sophisticated. Annual growth of regular pay excluding bonuses was 4.6% in the three months to September 2025, the lowest since April 2022. KPMG’s Report on Jobs for January 2026 reported that recruitment activity weakened in December as permanent placements fell at the sharpest rate since August, while candidate availability surged amid redundancies. However, starting salary inflation reached a seven-month high as employers competed for specialised talent.
Nominal salary increases for C-suite roles averaged 3.1% in 2025, barely outpacing inflation, but total compensation packages are evolving rapidly. Signing bonuses have increased in frequency, offsetting compressed base salaries.
Flexibility remains a negotiation point, with many FTSE 350 firms requiring executives on-site three or more days per week.
The Eurozone is projected to expand by approximately 1.2% in 2026, with significant regional variation. Germany’s manufacturing output declined 2.1% year-on-year in Q4 2025, with automotive and chemicals sectors shedding senior roles. However, Germany’s €10 billion “Sovereign AI” initiative is creating concentrated demand in biotech, quantum computing and autonomous systems. Spain’s unemployment rate has fallen to 11.2%, its lowest in 15 years. According to Indeed’s European Job Postings Tracker, executive vacancies in Spain and Italy remain 53% and 46% above pre-pandemic levels, respectively, concentrated in professional services and construction tied to EU recovery funds. The EU’s data localisation regulations and proliferation of national AI governance frameworks are creating compliance complexity that favours executives with cross-border expertise.
Articulate Value Creation, Not Activity: In a low-growth environment, boards scrutinise return on investment with forensic intensity. Executives must demonstrate measurable impact: revenue defended, costs extracted, processes redesigned. The ability to tell a compelling value story, quantified and evidence-based, separates those who secure roles from those who circulate CVs indefinitely.
Develop AI Governance Fluency: By 2026, AI literacy is no longer a technology function competency but a baseline executive requirement. Leaders must be conversant in ethical deployment, bias mitigation and regulatory frameworks. The EU AI Act, now in force, imposes obligations on executive leadership for high-risk AI systems. Boards are asking pointed questions about algorithmic accountability and executives without credible answers may find themselves passed over.
Navigate Trade and Regulatory Complexity: With UK trade disrupted by US tariffs and EU regulatory fragmentation intensifying, executives who can demonstrate facility with cross-border operations, supply chain reconfiguration and tariff mitigation strategies are commanding premiums. This competency extends beyond traditional international roles to any leader managing supplier relationships or market access.
Cultivate Continuous Development: The most successful executives treat their own capabilities as a continuous project. Whether through structured coaching, peer advisory networks or targeted upskilling in emerging domains, the goal is sustained relevance. Organisations now expect executives to demonstrate recent learning, not simply cite past achievements.
The outlook for Q1 2026 is one of selective opportunity within structural constraint. While macroeconomic growth remains modest, the market for top-tier leadership is exceptionally dynamic. Generalist executives face headwinds; specialists with demonstrable impact in constrained environments are in short supply.
This is not a market to wait out. The executives who will thrive are those who recognise that 2026 represents a structural reset, not a cyclical pause, and who take decisive action to align their capabilities, narratives, and networks with the new reality of value-led growth.
For Q1, 2026, insights on the US, Asia and Middle Eastern markets click here
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