UK salaries surge again as competition for staff heats up

[LONDON] UK starting salaries for permanent staff climbed at the second-fastest rate on record in February, driven higher by competition for workers and the cost of living crisis.

Job vacancies are opening faster than firms can fill them, according to a survey published Thursday by the Recruitment & Employment Confederation and consultancy KPMG. The shortage is giving bargaining power to workers, who are now wanting to be compensated for soaring prices.

The upward pressure on wages will add to expectations of a further Bank of England interest-rate increase this month. Policymakers Michael Saunders and Catherine Mann, both of whom voted last month for a 50 basis-point move, have stressed the importance of frontloading hikes to curb inflation and limit the need for future rate rises.

Salary increases combined with a planned payroll tax increase in April are creating "a perfect storm of rising costs for businesses", the report warned, and the strain is set to get worse with the war in Ukraine expected to push inflation above 8 per cent in the coming months. "This will further increase the financial pressure on businesses," it said.

"With many unable to keep up with the rate of increase, they will have to think carefully about their offer to staff to make it more appealing to stay."

Recruiters filled posts at a record pace last month but vacancies continued to rise, the survey found. Demand was particularly acute in the computing and hospitality sectors, with the latter reflecting the lifting of restrictions to tackle the Omicron variant of Covid-19.

Meanwhile, the pool of available candidates shrank at the fastest rate for 3 months, partly due to a drop in foreign applicants. BLOOMBERG