Overall turnover for the recruitment industry has fallen for only the second time since official figures began.

The Recruitment and Employment Confederation (REC) says industry turnover dropped by 4.2% to £23.5bn in 2004/2005 - a figure only slightly higher than 2000/2001.

The figures, which cover the period up until last March, also highlight an alarming slump in the fortunes of the temporary sector.

Figures from the REC's Annual Recruitment Industry Survey show that the turnover for temporary recruitment fell by 11% to £20.3bn.

Roger Tweedy, director of research at the REC, blames the slump on the difficult economic conditions recruiters experienced throughout 2005.

“I think things have improved since the survey ended, but this is still a tough period for the industry,” he said. “It will remain increasingly difficult for recruitment to grow at the rate seen over the last decade.”

Tweedy attributed the dip in temps to the fact that employers are now hoarding staff and taking on permanent employees to secure a skills base in the business at a time of major shortages.

“The economic climate has made it very difficult to operate a temp business. There's a growing trend towards permanent recruitment which has accelerated in recent times,” he said.

The REC says that the last quarter, has seen an improvement, but urges recruiters to evolve by looking at new business areas such as outsourcing.