Research from the Recruitment and Employment Confederation (REC) showed continued strong performance and increased employer optimism about growth prospects for both temporary agency workers and permanent staff.

The REC Industry Research Unit's monthly tracking research results for the last quarter of 2007 reported that employers predicted an increase in the use of agency workers over the next six month. More than third of employers (35%) expect demand will increase 'slightly' or 'greatly' — the highest level of optimism recorded by the survey.

Agencies reported that demand for permanent staff fell in the last quarter. However, employers believe that the long-term prospects for permanent jobs are good with most predicting growth in the next 12 months.

The survey comes as a welcome 'reality check' to counter some of the more negative recent assessments on the outlook for the UK's labour market.

Summing up the findings, Roger Tweedy, the REC's director of research, said: "During this period of uncertainty and heightened economic speculation, it is important to focus on what is happening on the ground. This research provides an invaluable reference point for recruiters and confirms that 2007 was another good year for the sector."

Overall, employers and agencies in 2007 were more optimistic about the demand for temporary agency workers in the next 12 months than they were in 2006. However, concerns remain over the impact of proposed new regulations covering the provision of temporary work in the UK.

Tom Hadley, REC's director of external relations, told Recruiter: "We must ensure that any new regulations such as those outlined in the forthcoming Private Members Bill do not hamper the effective provision of temporary work in the UK.

"This is especially true in such a delicate economic climate and at a time when temporary work can provide a vital stepping stone into the labour market for key target groups."