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Salaries grew at their fastest rate in six months in March, boosted by rising vacancies and fewer people with the skills necessary to meet the demand, according to a survey by KPMG and REC.
Their March survey data also highlighted further growth of recruitment activity across the UK. Permanent staff placements rose at a rate unchanged from February, while temporary placements’ growth was only slightly slower than the five-month high recorded in the preceding period.
The survey’s index of job vacancies rose to a five-month high in March, signalling strong demand for staff. Marked rates of expansion were indicated for both permanent and short-term workers.
Average starting salaries for people placed in permanent job roles increased further in March. The latest increase was the strongest since last September. Hourly rates of pay for temporary/contract staff also kept rising, but at a slower pace than in February.
The availability of staff to fill vacancies continued to decline in March. The latest drop in permanent candidate supply was the sharpest in four months, while temp availability deteriorated at the fastest pace since last October.
Growth was strongest in the Midlands and the South. Private sector demand for staff remained stronger than that in the public sector during March. The sectors where there was most demand for permanent staff were Engineering and Accounting/Financial. For temporary staff, the biggest increase in demand was for nursing, medical and care workers.
Bernard Brown, Partner and Head of Business Services at KPMG, said:“Recruiters are struggling with industry-wide skills shortages, as demand for talent continues to outstrip the number of candidates seeking work. This pervasive skills shortage could put the brakes on economic growth if it continues unabated.
“This tightening labour market is forcing up wage inflation as businesses bid for the best talent. Such a trend could cause a two-tier pay market, creating a significant divide between highly paid new starters and current employees receiving subdued pay increases. This dynamic will cause businesses problems in the long term as they struggle to keep hold of talented staff increasingly dissatisfied by their remuneration packages.”
Kevin Green, REC chief executive, says: “Almost a third of recruiters say that starting salaries have increased in comparison to last month, and we’ve seen another increase in the number of people that have found a new job via a recruiter.
“This suggests that labour market fluidity is returning – candidates are more confident about looking for work, and there are opportunities to earn more for those that do. Employers need to realise that people are deciding to change jobs because they can earn more than in their current job.
“Increases in starting salary offers are being driven by skills and talent shortages across the economy, and businesses are going to have to think hard about retaining scarce resource.
“We have acute shortages in the public sector, with recruiters reporting that teachers and healthcare workers are hard to find both for permanent and temporary vacancies. As politicians debate skills, education and immigration in the run-up to the election, we hope they recognise the potential impact of this skills crisis, because a lack of workers to meet demand threatens the sustainability of our economic growth.”