London starting salaries are rising at their fastest rate on record in the latest signal that the capital’s economy is roaring back to life.
Huge demand from employers combined with a severe shortage of skilled staff sent wages racing higher in January at their fastest rate in the 24-year history of a monthly survey published on Thursday.
Employers have been firmly in recruitment mode since the last lockdown ended last Spring and most restrictions were lifted in the summer.
The Plan B measures, including the work from home guidance in December and January, are increasingly looking like a short-term blip in London’s recovery rather than a major setback.
However, there are fears that the shortfall in skilled staff fuelled by Brexit and what has been termed “the Great Resignation” as people reassess their lives could hold back London’s bounce back.
The survey found that 59 per cent of London employers found that starting salaries increased during the month while 41 per cent saw no change. This is the highest reading for the index since it was first compiled in October 1997.
City lawyers are the latest profession to see starting salaries pushed to all-time highs with pay for newly qualified lawyers rising by up to 50 per cent to as high as £150,000.
Other roles proving particularly hard to fill included chefs, accountants, security guards, compliance officers, software engineers, nurses, social workers and shop assistants, according to the survey.
Across the UK there were a record of 1,247,000 job vacancies in the three months to December, an increase of 462,000 from pre-pandemic levels, according to latest figures from the Office for National Statistics, but the problem is most acute in the capital.
Anna Purchas, London office senior partner at consultants KPMG UK, which publishes the survey with recruitment body REC, said: “As the capital looks to recover, the severe candidate shortage has driven starting salaries in London to an unprecedented level. This, combined with the other rising cost challenges, is placing pressure on the profitability of businesses in the capital, and risks hampering their ability to grow.
“There is huge competition for talent in London and sourcing those skills locally is a challenge. Whilst addressing our skills shortage starts with our young people in schools, colleges and universities - ensuring they have the skills employers are looking for - there remains a huge task to reskill those workers in the capital who are unemployed and those whose roles are changing either due to automation or because of new skills required to meet our environmental commitments.”
Neil Carberry, chief executive of REC, said: “The jobs market is still growing strongly at the start of 2022. Recruiters are working hard to place people into work as demand from employers continues to rise.
“With competition for staff still hot, companies are having to raise pay rates for new starters to attract the best people. And the cost of living crisis means there is also more pressure from jobseekers who want a pay rise. But pay is not the only important factor - companies must think about all aspects of their offer to candidates to ensure they get the staff they need. This will be important as firms’ spending is under pressure from inflation as well.
“Government’s role is to manage inflation, but also to ensure that they do not discourage investment - that is what will drive the economy to grow through this year. Now is the wrong time to be raising National Insurance, the biggest business tax.
“But politicians should also be thinking about longer-term workforce planning, making sure we have the skills the country needs for the future. This will take a collaborative effort between the public and private sectors, and the recruitment industry stands ready to help.”
