I have just started my second year of an EPSRC funded PhD.

Passed my confirmation review last week and have a conference paper from my first year (the conference was quite niche and unheard of). But I feel quite unhappy and lost at the moment.

I feel like my research proposal is rubbish, and I don't feel particularly proud or interested in the work I am doing.

My PhD is an interdisciplinary one, based in engineering, but also doing some machine learning. I would prefer to have a PhD based in machine learning but my confirmation examiners told me I won't be progressing the field of ML but instead it has to be an engineering PhD (it is based between two departments).

I constantly worry about whether I'll be able to get a job at the end of the PhD as I am unsure I want to stay in academia, and I wonder if the next two years could be better spent by gaining industry experience (I want to be a data scientist) and earning a decent salary - if I can even get a job.

I am doubting whether I thought carefully enough about my decision to go and do a PhD in the first place, and maybe wish I chose to do one at a different university to my undergraduate degree.

There are some aspects of doing a PhD I enjoy:
Teaching
Coding in Python and learning new skills

Don't really know what I'm hoping for, is this second year blues/imposter syndrome? Or is this a gut instinct that I should look for jobs and quit?

I felt the same way and got through it. My interdisciplinary project is awful and borderline impossible from a methodology perspective (we don't have the right equipment). My research would be phenomenally better with better equipment and I know someone in another uni will repeat my work to a better standard. Which is a bit of a bummer as I know my work will be insignificant in the long term (like most research). Yet I kept asking myself what else would I be doing instead of a PhD. I looked for jobs at one point and realised that I was in the field in that I wanted to be in. I know my job prospects are bleak but I will have a PhD in the relevant field which counts for something.

There is nothing wrong with looking around and considering your options. You have probably realised that you don't like academic life, which is more than fine. Most PhD students get tired of academia and worry about jobs afterwards. I think there is nothing wrong with considering your options and deciding if finishing your PhD is the best decision. Though if you are doing well with your PhD you can always aim to finish early and move on with your life.