By David Milliken

LONDON (Reuters) -British businesses hired staff at a slower pace in May as demand for staff fell for an eighth consecutive month, but there were some signs that the downturn was beginning to bottom out, a survey of recruiters showed on Friday.

The Recruitment and Employment Confederation said its members reported a further big fall in hiring for permanent jobs but spending on temporary staff fell by the least in six months.

"More encouraging signs in temp billings, vacancies and stabilising private-sector demand offer a measure of optimism as we head into the second half of the year," REC Chief Executive Neil Carberry said.

Britain's labour market is facing headwinds including weak economic growth, a sharp rise in employers' social security contributions and a near-7% rise in the minimum wage which took effect in April.

Tax data showed that the number of employees on company payrolls dropped by the most in five years last month, while the unemployment rate for the three months to April rose to its highest in nearly four years at 4.6%.

REC said its members reported that the number of candidates seeking work had increased at the fastest pace since December 2020 last month "amid reports of redundancies and fewer job opportunities".

The Bank of England - which is expected to keep interest rates on hold next week - has said that developments in the labour market will be key to determining how fast it lowers interest rates.

Private-sector regular pay growth slowed to 5.1% in the three months to April from 5.5% in the first quarter of 2025 but still remains well above levels the BoE views as consistent with getting inflation back to its 2% target.

REC said starting salaries for permanent staff had picked up in May to rise at the quickest pace since August 2024 and that wages for temporary staff rose by the most in a year. But - unlike the official wage data - REC said its measures of pay growth remained below their long-run averages.

(Reporting by David Milliken; editing by Suban Abdulla)