Salary inflation rises sharply due to staff shortages

The rate of salary inflation was the sharpest seen in nearly 24 years of data collection due to staff shortages, according to the lack of available candidates and rising job vacancies, according to the latest KPMG and REC UK Report on Jobs survey.

The report shows recruitment activity continued to rise sharply across the UK at the start of the third quarter,  with permanent staff appointments and temp billings both rising at near-record rate.

The report says the availability of candidates continued to decline rapidly in July, driven by concerns over job security due to the pandemic, a lack of European workers due to Brexit and a generally low unemployment rate, intensifying pay pressures. Starting salaries are rising at the fastest rate in the survey history, says the report, compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

There were marked increases in permanent staff appointments across all four monitored English regions. London saw by far the quickest expansion, while growth softened in the South and North of England, but remained robust overall.

The report says stronger increases in vacancies across the private sector offset softer rises in the public sector during July. In the private sector, demand for permanent staff expanded at a slightly quicker pace than for temporary workers. In contrast, short-term vacancies rose more quickly than permanent roles in the public sector. The biggest demand was for IT & Computing.

Meanwhile, a survey of school leavers by City & Guilds found young people are deferring entering the workforce due to pandemic insecurity.

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