By Daniel Hunter

The average starting salary in the UK grew by the fastest rate in six months, according to accountants KPMG and the Recruitment and Employment Confederation (REC).

Nearly a third (31%) of recruiters said that starting salaries are higher than last month, with pay growth especially strong in the Midlands, where 34.8% of recruiters report higher starting salaries, and the south (36.6%).

But the study showed that the number of people looking for jobs fell. Recruiters said that candidate availability fell at the sharpest rate for four months.

Kevin Green, REC chief executive, said: “Almost a third of recruiters say that starting salaries have increased in comparison to last month, and we’ve seen another increase in the number of people that have found a new job via a recruiter.

“This suggests that labour market fluidity is returning - candidates are more confident about looking for work, and there are opportunities to earn more for those that do. Employers need to realise that people are deciding to change jobs because they can earn more than in their current job.

“Increases in starting salary offers are being driven by skills and talent shortages across the economy, and businesses are going to have to think hard about retaining scarce resource.

“We have acute shortages in the public sector, with recruiters reporting that teachers and healthcare workers are hard to find both for permanent and temporary vacancies. As politicians debate skills, education and immigration in the run up to the election, we hope they recognise the potential impact of this skills crisis, because a lack of workers to meet demand threatens the sustainability of our economic growth.”

Bernard Brown, Partner and Head of Business Services at KPMG, said: “Recruiters are struggling with industry-wide skills shortages, as demand for talent continues to outstrip the number of candidates seeking work. This pervasive skills shortage could put the brakes on economic growth if it continues unabated.

“Nervousness in the run up to the election could be one factor seizing the market, as candidates seek certainty before leaving the safe haven of their current role.
“This tightening labour market is forcing up wage inflation as businesses bid for the best talent. Such a trend could cause a two-tier pay market, creating a significant divide between highly paid new starters and current employees receiving subdued pay increases. This dynamic will cause businesses problems in the long term as they struggle to keep hold of talented staff increasingly dissatisfied by their remuneration packages.”