Employers are holding back from hiring new permanent staff because of worries about the UK’s economic outlook, according to a closely-watched survey.

The poll of 400 recruitment agencies found 43% saw a drop in permanent hires in July, with the number of new recruits declining at the quickest rate in three years.

KPMG and the Recruitment and Employment Confederation (REC), which carried out the research, said it came amid “frequent reports” of redundancies and ongoing hiring freezes at many companies.

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It also found the number of available jobs candidates rose, while total vacancies increased at the slowest pace in 29 months.

Claire Warnes, of KPMG, said: “The latest survey results reflect the current summer weather – damp, but with some possible bright skies on the horizon.

“Recruiters told us that their clients aren’t yet confident enough in the economic outlook to commit to permanent hires, leading to the steepest pace of decline in placements since June 2020.”

She added: “Businesses are also still freezing hiring, with some redundancies, which led to the sharpest upturn in labour supply since December 2020.

“This is good news for recruiters who have an even larger pool of candidates to place, but with the number of vacancies available increasing at the slowest pace for nearly two and a half years, supply and demand are once again off balance.”

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On wages, the survey found that salaries “rose sharply” for those who did manage to secure new permanent jobs, amid competition for skilled candidates and the rising cost of living.

The REC’s chief executive Neil Carberry said: “The jobs market overall remains fairly robust, with vacancies and pay still rising and unemployment low, but there is a sense in today’s report that the economy will need some growth soon to sustain this positive picture.

“Permanent hiring has been slowing all year. To some extent this is normalisation as the post-pandemic boom abates, but it is also driven by uncertainty.

“Hiring overall is still at a good level, and some sectors remain under pressure from significant labour shortages, including hospitality and construction.”

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