Worries about inflation and a shortage of workers pushed the U.K. starting salaries up by their third-fastest pace on record in January, according to a survey that may add to Bank of England concerns over rampant wage gains.
Demand for workers continued to climb as pandemic restrictions eased, though the growth of vacancies cooled to the slowest pace in nine months, the Recruitment and Employment Confederation and KPMG said Thursday.
A separate report from the British Chambers of Commerce found that 63% of firms faced pressure to increase prices because of bigger wage bills.
BOE policymakers have indicated that they’re watching such surveys closely for signs that workers’ expectations of future inflation are spurring their demands for higher salaries, in case of a wage-price spiral, so together the findings heap pressure on the BOE to hike rates for a third straight meeting in March.
Central bank Governor Andrew Bailey last week called on workers and companies to exercise restraint during pay negotiations to prevent inflation spiraling out of control.
“With competition for staff still hot, companies are having to raise pay rates for new starters to attract the best people,” said Claire Warnes, head of education, skills, and productivity at KPMG. “The cost of living crisis means there is also more pressure from job seekers who want a pay rise.”
With surging inflation exacerbating a looming squeeze on incomes for both households and firms, BCC Director general Shevaun Haviland called on the Chancellor of the Exchequer Rishi Sunak to delay an increase in the payroll tax, planned for April, by a year to give businesses breathing space at a time when energy bills are also due to rising.
“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,” she said.
The REC’s survey of 400 recruitment agencies also found: