Employer confidence in the UK economy has fallen to its lowest level since the Brexit vote last year, according to the latest JobsOutlook survey by the Recruitment & Employment Confederation.

The survey, which polled more than 600 employers, showed 29% of firms surveyed reported higher confidence in hiring and investment, but 20% were less confident than before. The positive margin was the narrowest since the REC started the survey in its current form in June 2016.

The net balance fell from 6% last month to -3% in the latest report, as 31% of employers now expect the economy to worsen and 28% expect it to improve. However, the report shows that employers are still looking to hire, with 19% planning to increase permanent headcount in the next three months.

“The jobs market continues to do well despite growing uncertainty. However, this drop in employer confidence should raise a red flag,” REC chief executive Kevin Green, said. “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.

Meanwhile, the survey also showed that 40% of employers have no spare capacity and would need to recruit to meet additional demand. Additionally, more employers are expressing concerns about a lack of appropriate candidates for construction jobs (both temporary and permanent) than any other area.

Further research from market research firm GfK showed that the index of consumer confidence fell to -12, equalling last year’s post-referendum low.

 “The added factor of dropping consumer confidence is putting some businesses on edge,” Green said. “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,” Green said. “The jobs market is in a good place but employers will only continue to hire and invest if they feel assured about the future.”