A clothing retail shop advertises for workers in Brighton, Britain, August 15, 2023. REUTERS/Toby Melville

MANCHESTER, England (Reuters) -The downturn in Britain's labour market abated slightly last month as recruiters reported the first increase in demand for temporary staff in over a year, a survey showed on Friday.

The monthly Report on Jobs from accountants KPMG and the Recruitment and Employment Confederation (REC), a trade body, showed permanent job placements contracted in October at the slowest rate since July last year.

While the readings still fitted with a subdued picture of the labour market, they pointed to a stabilisation ahead of finance minister Rachel Reeves' November 26 budget.

"Today's data reflects the more positive outlook we have been hearing from recruiters since the start of the autumn," said Neil Carberry, REC chief executive.

Carberry added that recruiters held similar optimism ahead of last year's budget, dashed by large tax increases on employers that resulted in higher unemployment and redundancies.

Official data earlier this month showed the unemployment rate hit 5.0% in the third quarter, which some economists linked to the tax hikes that took effect in April.

"As we go into Budget 2025, there can be no repeat. If Government cares about growth, as it claims, measures must stoke business investment, not deter it," Carberry said.

Reeves is widely expected to raise income tax later this month, which would break a manifesto promise not to raise taxes on working people. On Monday she said sticking to the pledges would mean harmful cuts in capital spending.

The KPMG/REC survey's gauge of permanent staff starting salaries rose to a three-month high, but still indicated only tepid growth.

The survey is watched by Bank of England interest rate-setters as a gauge of employment and private sector wage growth, which cooled in the three months to September as the central bank had expected.

(Reporting by Andy Bruce; editing by Suban Abdulla)