Image copyright Getty Images

UK employers are growing increasingly worried about the economy, new research has found.

A survey of 601 employers by the Recruitment and Employment Confederation (REC) found 31% expect the economy to worsen, with only 28% expecting it to improve.

Employers' confidence has worsened since the last survey in July.

REC chief Kevin Green said the decline should "raise a red flag" and called for greater clarity over Brexit.

"The jobs market continues to do well despite growing uncertainty," he said. "Businesses are continuing to hire to meet demand, but issues like access to labour, Brexit negotiations and political uncertainty are creating nervousness."

The REC's measure of confidence has turned negative in the space of a month. In July the number of those employers who felt confident about the economy outweighed the pessimists by 6 percentage points.

The fall is matched by declining consumer confidence. In June the market research group GfK's consumer confidence index fell to the level last seen in the immediate aftermath of the Brexit vote.

No spare capacity

The REC's JobsOutlook survey showed that 40% of employers had no spare capacity and one in five planned to take on more permanent staff to meet additional demand.

Image copyright Getty Images Image caption It's getting harder to find skilled workers according to the REC

However, their biggest problem was finding the right candidates, especially in the construction industry, for either temporary or permanent positions.

Mr Green said: "Employers in the construction sector are especially concerned as they rely heavily on EU workers to meet the growing demand for housing and to support the government's infrastructure plans.

"The added factor of dropping consumer confidence is putting some businesses on edge. If people reduce their spending, businesses will be impacted.

"The government must do more to create an environment where businesses have clarity. That means clearly laying out what Brexit plans look like and how employers can keep recruiting the people they need from the EU."

Labour MP Mary Creagh, part of the Open Britain campaign group, said the government's refusal to guarantee the rights of EU citizens living in the UK was damaging business confidence.

"To protect jobs and our economy, they need to give citizens and businesses certainty that all EU workers living in Britain will have their rights guaranteed, and that Brexit will not be used as an excuse for a self-defeating crackdown on immigration from Europe," she said.

A government spokesperson said: "We recognise and value the contribution that EU citizens make to the social, economic and cultural life of the UK and that's why last month we outlined our offer to protect the rights of EU citizens in the UK and UK nationals in the EU."