The UK job market weakened further in August according to a joint report by the Recruitment and Employment Confederation (REC) and KPMG.

According to the August Report on Jobs, permanent placements fell at the sharpest rate since November 2001, and temporary placements fell at a ‘record pace’.

Salary growth is also the weakest for five years, the report claimed, with declining demand for staff and strong candidate availability dampening pay pressures.

Kevin Green, chief executive of the REC, said: “The deteriorating economy is now having the expected negative impact on the labour market. The demand for both permanent and temporary workers is weakening, although it must be remembered that this follows a period of unprecedented high demand for staff.

“A positive benefit for the economy is the muted pay growth that the increase in the supply of candidates is creating. Even in these uncertain times, recruitment consultancies are still seeing continued demand for flexible staffing to meet businesses fluctuating people requirements.”

Alan Nolan, director at KPMG, said: “The slide in the UK economy continues to hit the jobs market hard – with yet another sharp drop in recruitment. UK employers are continuing to control payroll costs through redundancies - and by refusing to take advantage of a growing (but increasingly unused) pool of skilled labour.

“These workers are starting to drift abroad in search of employment – and there is a risk that (when the market turns) the UK will be left behind by a skills shortage. Employers have to meet their fiscal obligations to HM Revenue and Customs in full and on time with stringent penalties and interest for non-compliance. It may now be time for Government to consider kick-starting the jobs market by relaxing this legislation - enabling the possibility of tax payment deferrals or ‘holidays’.”