Employers’ confidence in the UK economy fell 8% for the quarter ended February 2019, when compared to the previous quarter. At the same time, employers’ confidence in making hiring and investment decisions declined by 6%, according to the latest JobsOutlook survey from the Recruitment and Employment Confederation.

REC’s data showed that employers’ confidence in the prospects for the UK economy stood at a net -28, the lowest level since the JobsOutlook survey began measuring sentiment about the economy amongst UK businesses.

The falling confidence impacted employers’ confidence in making hiring and investment decisions as confidence declined to a net -1, the first time this measure has dropped into negative territory since the survey started in 2016.

Despite the softening in employer confidence, REC’s data showed that employers are still ready to hire in some areas. More employers planned to increase, rather than decrease their permanent headcount in the short-term, at net +17. Over the medium-term, forecasts for permanent hiring fell three percentage points this month, but remained positive at net +22.

Turning to temporary recruitment, at net -7, the balance of sentiment for hiring agency workers in the short-term was 13% lower than a year earlier. Sentiment in the medium term was 21% lower than last year, at net -8.

Neil Carberry, Chief Executive of the REC commented, “A year of falling business investment and weeks of Brexit inertia mean no-one should be surprised that employers’ confidence in hiring for their own business is now dropping. For months, businesses have told us that they were concerned about the general outlook for the economy, it is clear to us that this concern is now closer to home. Lower use of temporary labour is a sign of lower demand.”

“But our jobs market is robust. Even now, recruiters are finding people new jobs and helping companies to compete. The fact that permanent hiring plans are still positive is a sign that the economy will deliver, if the fog of uncertainty is lifted from British business,” Carberry said.

Further data from the REC showed that 49% of UK employers expressed concern about the availability of permanent-hire candidates, with a lack of Engineering & Technical and Health & Social Care workers continuing to cause most concern.

Meanwhile, 35% of employers intending to hire temporary workers expressed concern over the sufficient number of agency workers with the necessary skills they require. This is the same proportion as a year earlier. Employers are expecting the most severe skills shortages among construction workers, followed by education workers and drivers.

The majority of employers (82%) had either no surplus workforce capacity, or such a small amount that they may need to hire more staff if demand increased. Nearly half, or 47%, highlighted using agency workers to manage uncertainty, and access to short-term skills (51%), as important reasons to use temporary agency workers. Most employers (83%) highlighted that the geographical and/or skills sourcing expertise of an agency was an important criterion when selecting their recruitment agency partners.