By Suban Abdulla

LONDON British employers reduced the number of new permanent staff they hired through recruitment agencies by the most since mid 2020 last month due to concerns about the economic outlook, adding to signs that the market is becoming tougher for job seekers.

A gauge of permanent staff hiring by the Recruitment and Employment Confederation and accountants KPMG fell to 42.4, the lowest since the 34.3 in June 2020 when the country was in lockdown due to the COVID-19 pandemic.

The survey's measure of temporary staff hiring, which often rises when employers are cautious about the outlook, in July showed the weakest growth in nine months - partly because more workers were looking for the security of permanent roles.

Neil Carberry, chief executive of REC, said the jobs market remained "fairly robust" despite the slowdown in permanent placements.

"To some extend this is normalisation as the post-pandemic boom abates, but it is also driven by uncertainty," he said.

While starting pay for new permanent staff rose sharply by pre-pandemic standards, the rate of wage growth was the lowest since April 2021, REC said.

Claire Warnes, partner of skills and productivity at KPMG UK, said competition for skilled workers and cost of living pressures were keeping starting salaries high.

Monday's survey chimed with other indicators showing the labour market is loosening, welcome news for the Bank of England which raised interest rates for the 14th meeting in a row to 5.25% last week and has been concerned about high wage growth.

Official data showed unemployment rose to 4% in the three months to May, a 16-month high, although annual wage growth remained at a record high of 7.3% in cash terms.

Separate figures from accountants BDO showed rising interest rates, tough trading conditions and weak demand hit hiring intentions and business confidence across services and manufacturing sectors.

BDO's employment index fell for the first time in six months in July and its optimism gauge declined for the first time in four months.

REC said the availability of both temporary and permanent workers to fill jobs hit the highest since December 2020.

(Reporting by Suban Abdulla; editing by David Milliken)