The number of people actively seeking work in the UK has surged to its highest level in nearly five years, according to a closely watched survey that points to a cooling jobs market.

The monthly KPMG and Recruitment and Employment Confederation (REC) report on jobs shows that while permanent hiring activity improved slightly in August, recruitment remains in decline. Permanent placements recorded a reading of 44.2, up from 40 in July, but still well below the 50-point threshold that signals growth.

Temporary job placements also fell at a slower rate, rising from 44.6 in July to 46.8, but the market remains subdued. The report noted that the availability of candidates for both permanent and temporary roles has risen at its fastest pace since November 2020, driven by rising redundancies and fewer vacancies.

Neil Carberry, chief executive of REC, said the data reflected “a summer slowdown” but pointed to potential for improvement later in the year. “With fewer vacancies and more candidates looking for work, the overall picture is still subdued. All eyes are now on the autumn Budget, in hope that the Chancellor won’t do further damage to the labour market with costs on hiring,” he said.

The findings echo a recent Bank of England survey that showed UK businesses cut employment at the fastest pace in almost four years, reducing staff levels by 0.5% in the three months to August.

Jon Holt, group chief executive of KPMG UK, said uncertainty over government policy and the wider economy was prompting firms to delay recruitment. “It’s unlikely we’ll see a significant shift in hiring patterns in the near term as businesses evaluate their investment strategies amid speculation about tax changes and the rapid pace of technological change,” he said.

The KPMG and REC survey, based on responses from around 400 recruitment consultancies, underscores the strain on the labour market as companies grapple with rising wage bills, higher National Insurance contributions and continued economic headwinds.