Demand for permanent staff among UK employers fell substantially last month, new figures from the Recruitment and Employment Confederation (REC) show.

Its Report on Jobs study reveals that the number of vacancies for permanent posts declined in July at its fastest rate since December 2001.

Growth in temporary placements was also at its weakest in five years, the report shows.

Kevin Green, chief executive of the REC, said: "The report’s latest figures show a continued decline in permanent placements, which has now spread to the traditionally robust temporary jobs market."

He said business confidence has been hit by the credit crunch and employers are putting recruitment on hold as a result.

Alan Nolan, director at KPMG, said statistics from the construction industry demonstrate the impact of economic problems on the jobs market, as recruitment in this sector, particularly for temporary labour, is usually strong.

Reuters reports that the British recruitment company Spring Group – which specialises in the IT sector – has reported sustained demand for its services among job seekers.