Yahoo News UK salaries soar at near record pace but jobs cool in January
Demand for UK workers continued to grow as coronavirus restrictions eased, but vacancies cooled to their slowest pace in nine months, a new report says.
While the Bank of England (BoE) signalled worries over an overheating labour market and rampant wage gains, the Recruitment and Employment Confederation (REC) and KPMG said that their index of demand for staff eased to 68.6 from 69.3 in December.
Although this was the lowest reading since May it is still well above its long run average.
Starting salaries for permanent staff continued to increase at a rapid rate in January, pushed up by inflation fears and shortage of UK workers. This was the third-highest on record since 1997, but it slowed for temporary staff.
BoE governor Andrew Bailey last week urged Brits to limit their pay bargaining to prevent the country sliding into a wage-price spiral, with annual inflation already running at a 30-year high and predicted to top 7% in April. This is more than triple the BoE target of 2%.
"With competition for staff still hot, companies are having to raise pay rates for new starters to attract the best people," said Neil Carberry, CEO of the REC. "The cost of living crisis means there is also more pressure from jobseekers who want a pay rise."
The main reasons the central bank raised interest rates to 0.5% last week were staff shortages and strong wage growth, that appears to be faster than pre-COVID levels. This was the second rate rise in two-months.
The BoE thinks labour market pressures will stop inflation trickling back to its 2% target unless borrowing costs grow higher.
Read more: UK inflation to peak at 7% as household inequalities widen
Claire Warnes, head of education, skills and productivity at KPMG UK, added: "It will be important to monitor how these dynamic features of the job market respond to the competing pressures being felt by both businesses and candidates – the desire to make the most of the reduction in COVID restrictions on the one hand; and the understandable concern over the cost of living and inflationary rises on the other."
The REC’s survey of 400 recruitment agencies also found:
Pay growth for temporary employees eased to a seven-month low
Job vacancies for permanent private-sector roles grew the fastest
South of England had the steepest rise in permanent staff appointments
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A separate report from the British Chambers of Commerce found that 63% of UK companies faced pressure to increase prices due to bigger wage bills.
As a squeeze on incomes looms for both households and businesses exacerbated by soaring inflation, BCC director general Shevaun Haviland urged UK chancellor Rishi Sunak to delay an increase in national insurance tax, planned for April, by a year to give firms a cooling off period at a time when energy bills are also due to rise.
"Unabated, the surging cost pressures produced by the cost-of-doing-business crisis will continue to lead to increased prices and fuel the cost-of-living crisis currently being faced by people across the country," Haviland said.
