Private sector hiring intentions have reached a 30-month peak as business confidence approaches record levels, according to the latest BDO Employment Index.

The monthly report, which monitors businesses’ hiring intentions for the next two quarters, reached 99.4 in December, up from 98.3 in November.

The index has now been at or above the crucial 95.0 level that indicates employment growth for 12 months and is now almost at the 100.0 mark which points to employment increasing at its long-term rate. This indicates that employment is gaining pace with the wider economic recovery.

Business confidence showed similar improvement, with BDO’s Optimism Index, which predicts business performance two quarters ahead, reaching 103.4 in December, up from 103.1 in November ? its best reading in more than seven years and only just below the all-time high in the 22-year history of the report.

Marilyn Martin, partner and head of BDO LLP in East Anglia, said: “We’re encouraged to see that businesses are growing in confidence and have sharply increased their hiring intentions over the past month, which should help to keep the unemployment rate on a downward trajectory.

“The issue of unemployment is particularly important given the Bank of England Governor Mark Carney’s decision not to allow an interest rate rise until the unemployment rate is at or below 7%.

“The flip side of all this is that labour productivity is still far below its pre-crisis peak. As a result, the issue of underemployment remains, with some 1.5 million workers seeking full-time jobs being forced to work part-time over August-October 2013.

“Linked to the debate around employment is the politically sensitive issue of immigration. The Government will undoubtedly be waiting with baited breath to see the effect of the relaxation of border controls that came into force on January 1st 2014. However, our data suggests that the UK has the capability to create more jobs both for UK citizens and for others than some might expect.”