There is good news for IT contractors, as the latest research shows that demand for workers in August remained steady and in some areas increased during August.

Recruitment consultant Reed says the small to medium-sized businesses in particular were optimistic over their future hiring plans.

These are strong results, considering there is traditionally a recruitment slump in the summer, while uncertainty over the effect of public spending cuts continues to hang like a dark cloud over the employment sector.

"Against this background, the fact that the Reed Job Index has held steady over the holiday season, even though public sector jobs continue to decline, is quietly encouraging news for the economy as a whole," Reed's managing director Martin Warnes said.

However, Jonathan Loynes of Capital Economics recently suggested that job squeezes in the public sector are beginning, with anything from 500,000 to one million roles to be lost over the next year or two.