UK recruiters say rising salaries reflect skills shortage

British firms stepped up hiring last month, with salaries continuing to rise strongly as businesses competed for dwindling numbers of qualified staff, a monthly survey of recruitment agencies showed today.

The figures from the Recruitment and Employment Confederation (REC) trade body show the biggest increase in the number of people placed in permanent jobs since February, with staff increasingly ready to switch jobs to gain higher pay.

“For the first time in months we are witnessing churn in the labour market - it seems that employees are finally beginning to wake up to the opportunities available to them,” said Bernard Brown, a partner at accountants KPMG, who sponsor the survey.

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The survey showed an increase - albeit slightly smaller than in June - in starting salaries for both permanent and temporary staff, as firms compete to draw in recruits.

However, previous strong readings from the survey have yet to be reflected in official wage data for the whole economy.

Figures last month from the Office for National Statistics showed annual wage growth excluding bonuses of just 0.7 per cent - the lowest since comparable records began in 2001.

Mixed messages about Britain’s labour market are a conundrum for the Bank of England as it considers when to raise interest rates and tries to judge how much more scope the economy has to grow rapidly without generating inflation.

“The UK’s post-recession problem is skill and talent shortages ... Hirers need to take on more young people and train and develop their employees like never before,” REC chief executive Kevin Green said.

“Our policy makers need to put politics to one side and take a sensible approach to immigration which focuses on helping British businesses get the skilled people they need.”

All categories of employment in the survey showed strong rates of growth for July. Construction workers were the most in demand thanks to the housing recovery, closely followed by engineering staff.

Another measure showed on Monday that hiring in construction rose in July to record-high levels as home-building expanded at its fastest rate since November 2003.

Mike Leonard, chief executive of campaign Get Britain Building, told Reuters the construction job market is naturally cyclical, but that the current skills shortage had been exacerbated by the large numbers of young people turned away from the sector during the recession.

Wages are increasing with the resulting demand across a number of construction professions, Leonard said, including even the typically lower-paid plumbers and electricians.