(Bloomberg) -- U.K. employers increased starting salaries at a record pace in November amid an “unsustainable” shortage of workers, according to a survey published Thursday.
The report by the Recruitment and Employment Confederation and KPMG painted a picture of firms once again struggling to fill vacancies and being forced to boost compensation to attract workers.
The acute tightness of the labor market is a key concern at the Bank of England, where policy makers had appeared on course to raise interest rates next week until a new strain of coronavirus took hold. They are now expected to refrain until February to assess the impact of the omicron outbreak.
However, the REC report will do nothing to assuage their concerns about the scale of the pressures building in the labor market. The fear is that an inflation surge once regarded as “transitory” could prove more enduring if companies hike prices to cover soaring wage and supply-chain costs.
“The current trajectory is unsustainable in the long run for businesses and the wider economic recovery,” said Claire Warnes, head of education, skills and productivity at KPMG. “The priority must be to replenish the workforce and ensure businesses can access the talent they need.”
The survey of about 400 recruitment agencies found:
- Permanent placements of workers increased sharply across the country
- There were “marked” increases in job postings, with demand highest for people to work in IT and computing, and hotels and catering
- Candidate availability remained low, driving starting-salary inflation to its highest since data collection began in 1997
Early indications are that concerns about omicron are already being felt in sectors such as hospitality, where bars and restaurants are scaling back their hiring plans amid a slew of Christmas booking cancellations.
“December may be slower than previous months...but the broader outlook is more positive for candidates, suggesting that the labor market will remain tight for some time to come,” said Neil Carberry, chief executive of the REC. “This will put a premium on skills development, and the flexibility to hire overseas when necessary.”
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