UK employers are growing increasingly worried about the economy, new research has found.

The latest JobsOutlook survey of 601 employers by the Recruitment and Employment Confederation (REC) found 31 per cent expect the economy to worsen, with only 28 per cent expecting it to improve.

The REC’s measure of confidence has turned negative in the space of a month. In July the number of those employers who felt confident about the economy outweighed the pessimists by 6 percentage points.

The survey also showed that 40 per cent of employers had no spare capacity and one in five planned to take on more permanent staff to meet additional demand.

However, their biggest problem was finding the right candidates, especially in the construction industry, for either temporary or permanent positions.

A government spokesperson said:

“We recognise and value the contribution that EU citizens make to the social, economic and cultural life of the UK and that’s why last month we outlined our offer to protect the rights of EU citizens in the UK and UK nationals in the EU.”

Employers are still looking to hire, with one in five (19 per cent) planning to increase permanent headcount in the next three months. 

Confidence in making hiring and investment decisions remains positive with a net balance of 10 per cent, but is at its lowest for the past year. 

In addition to signs of deteriorating employer confidence, consumers are also becoming more pessimistic. The GfK’s index of consumer confidence fell to -12, equalling last year’s post-referendum low. 

REC chief executive Kevin Green says:

 “The jobs market continues to do well despite growing uncertainty. However, this drop in employer confidence should raise a red flag. 

“Businesses are continuing to hire to meet demand, but issues like access to labour, Brexit negotiations and political uncertainty are creating nervousness. Employers in the construction sector are especially concerned as they rely heavily on EU workers to meet the growing demand for housing and to support the government’s infrastructure plans.

“The added factor of dropping consumer confidence is putting some businesses on edge. If people reduce their spending, businesses will be impacted.

“The government must do more to create an environment where businesses have clarity. That means clearly laying out what Brexit plans look like and how employers can keep recruiting the people they need from the EU. The jobs market is in a good place but employers will only continue to hire and invest if they feel assured about the future.”

Rebecca joined the HRreview editorial team in January 2016. After graduating from the University of Sheffield Hallam in 2013 with a BA in English Literature, Rebecca has spent five years working in print and online journalism in Manchester and London. In the past she has been part of the editorial teams at Sleeper and Dezeen and has founded her own arts collective.