Employer confidence in the UK economy has dropped to the lowest level since the EU referendum, according to the latest JobsOutlook survey by the Recruitment & Employment Confederation (REC).

The survey of 600 employers also showed that 33% of employers believe that economic conditions are getting worse, while 26% think economic conditions are improving. The net balance fell further into negative territory, from -3 last month to -7 in September.

The smallest UK employers (0–49 employees) were the most pessimistic about the outlook for the UK economy being more likely to believe that conditions were worsening than improving.

“Employers are showing a great deal of resilience as they continue to hire despite a growing number losing faith in the direction the economy is heading,” REC chief executive Kevin Green said. “The political climate isn’t helping the situation. Businesses need clarity in order to plan effectively and so far the Brexit negotiations have not resolved any of the core issues.”

Despite falling confidence in the economy as a whole, confidence in hiring and investment decisions remains positive at +10% showing no change from last month. Hiring intentions are also stable, with one in five, or 19%, planning to increase permanent headcount in the next quarter.

In the medium-term (4-12 months) permanent hiring improved by 2% this quarter, with more employers suggesting planned increases over decreases in headcount.

For temporary recruitment, in the next three months, the net balance of sentiment towards short-term hiring of agency workers stayed the same, quarter-on-quarter. The medium-term prospects (4-12 months) for agency worker usage remained positive this quarter, with a net balance of 7% more employers planning increases over decreases.

Meanwhile, 59% of employers say that agency workers are important to responding to growth and more than a third, or 36%, expect to find a shortage of temporary agency workers to meet their needs. The survey also revealed a shortage of temporary workers is expected in the construction sector and a shortage of candidates to fill permanent health & social care roles is also anticipated.

“Employers are worried about how they will fill vacancies in the future,” Green said. “There are now just 1.9 unemployed people for every vacancy, and net migration from the EU is falling, which means the pool of people available to employers is shrinking.

“Businesses can only grow if they have access to the people and skills they need,” Green said. “With party conference season in full swing, we urge politicians of all sides to heed the warning signs and create clarity for business. That means making progress in the ongoing Brexit negotiations. An early agreement on the settlement of EU nationals already working in the UK would be a step in the right direction,” Green said.