The UK's largest recruitment group has revealed that the number of permanent job placements in London's square mile had fallen 20 per cent in the last three months.

Hays said that for the first time in five years growth in temporary appointments across the UK was outstripping permanent roles.

Paul Venables, the company's finance director, said the shift to temporary workers illustrated the nervousness of the UK economy.

"I don't have a crystal ball but clearly it is worse now than it was six months ago and it's not getting any better," he said.

However, he remained confident that the company would “come through whatever the UK economy gives us” due to its strong growth in other parts of the world.

Around 6 per cent of Hays’ UK business is with investment banks, rising to 11 per cent when including wider City professions such as legal work and other support functions.

In the City "everybody had their jobs in transactional operations and that's now happening any more," Mr Venables said. He added the number of workers required for mortgage initiation work had fallen but that there was an uptake in credit checking work.

The other key area of the concern for the company in the UK is the construction and property industry, representing 25 per cent of its UK and Ireland business, which saw a decline of 2 per cent in the number of placements, with the strength of the group's public sector work largely offsetting "very worrying" falls in residential construction.

Mr Venables said that overall the UK market was the worst the company had seen for five years but that it was not yet as gloomy as after the dotcom crash.

However, weakness in City and construction recruitment was offset by a solid quarter in accountancy and finance positions across the country, resulting in like for like net fee growth of 4 per cent for the three months ended June 30, down from growth of 5 per cent in the previous quarter.

Overall, the company posted like for like net fee growth of 16 per cent, boosted by operations in Asia Pacific and continental Europe, echoing comments from rival Michael Page earlier this week, which posted a sharp contrast between UK and international growth.

Hays reassured analysts stating that it expected to report results in line with expectations, with observers noting that trading was surprisingly robust. Shares closed down 1.5p at 76.5p.

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