Jobs outlook: demand for permanent staff falls for first time since 2003

Demand for permanent staff has fallen for the first time in five years, indicating a further weakening of the UK job market, research has found.

Last month's 'Report on Jobs' from the Recruitment and Employment Confederation and consultancy KPMG showed permanent placements index fell to 48.2 from 48.6, the sharpest decline in over five years. The permanent vacancies index also fell to 48.4 in June from 50.2, also the first drop in vacancies in the same time-span.

Appointments of temporary staff rose, but at a slower rate.

"The decline in the demand for permanent staff for the first time in five years indicates that employers are hesitating before making recruitment decisions," said Kevin Green, the REC's chief executive. "We anticipate that in this worsening economic climate, businesses will go to great lengths to retain the staff that they have worked hard to acquire in the last few years."

KPMG's director Alan Nolan added: "This really is a sobering set of figures proving the credit crunch has finally taken its toll and is now severely weakening the UK jobs market. Many employers now seem to be accepting the inevitable - they will have to cut costs by laying off people because their businesses won't be growing as much as they could have expected a couple of months ago."

"We already have seen widespread redundancy programmes in the City and among housebuilders and there are more to come," he said. "Even the usually robust temporary jobs market is coming under pressure, adding to the likelihood of a stagnant jobs market and rising unemployment for the foreseeable future."