UK wages surge as staff shortages bite

Latest figures show that the UK labour market is tightening as the number of people in full-time work rises however increased employment means that it is getting harder for employers to recruit necessary skills.

One man waiting for interview
The number of people in work in the UK has hit a new high with 396,000 new jobs being created in the past year, according to official figures released on Tuesday.The Office for National Statistics (ONS) also revealed that average earnings in the month of October alone increased by 3.9 per cent, driven by a 4.2 per cent rise in the service sector where staff shortages continue to be a major concern.

The number in work in the UK increases

In the three months to October, the number in work increased by 79,000, bringing the UK total workforce 32.48 million, the highest since records began in 1971. Meanwhile, job vacancies were up by 10,000 to a record high of 84,800.Although unemployment also increased by 20,000 over the quarter, the 1.38 million total was still almost 50,000 lower than it was a year earlier. The unemployment rate is now 4.1 per cent, compared to 4.3 per cent than a year ago.The annual increase in average earnings in the year to October stood at 3.3 per cent, the highest rate since 2008 and well ahead of the current inflation rate of 2.4 per cent.Matt Hughes, senior statistician at the ONS, said, "The employment rate has continued to rise in the most recent three months, returning to a joint record high, boosted by an increase in full-time workers."There was a corresponding fall in the inactivity rate, while the unemployment rate was virtually unchanged. Real earnings are now growing faster than at any time since around the end of 2016."

Increased employment means labour market is tightening

Suren Thiru, head of economics at the British Chambers of Commerce, commented, "Businesses report that the political and economic turbulence, together with significant difficulties finding the right staff, are diminishing recruitment intentions, which is likely to increasingly weigh on the UK labour market over the near term.“More must be done to support firms looking to recruit. Businesses are still waiting for the government’s long-delayed Immigration White Paper to shed light on how they will be able to plug local shortages in the future and find the skills they need to grow.”Ian Brinkley, acting chief economist at the CIPD, the professional body for HR and people development, said: “While the labour market has seen some growth in employment, and a very slight rise in unemployment, it is getting steadily tighter."This implies that labour and skill shortages will increase and recruitment and retention may become more challenging. However, these pressures stand to significantly increase if the current uncertainty over Brexit deters more migrants from coming to the UK and net migration from the EU continues to fall.“Wage growth has edged up slightly driven by the finance and business service sector. Real earnings have also strengthened. Historically, real wage growth and productivity growth have gone hand in hand, but it remains to be seen if rising real wages will also be reflected in better productivity figures in the months ahead, given the current Brexit crisis.“It’s vital that employers look at how they can invest in skills and adopt the right people management practices to boost productivity in their organisation and the UK overall.”

UK economy finally recovering from 2008 financial crisis

Prof Geraint Johnes, professor of economics at Lancaster University Management School, said the data showed that the UK is finally recovering from the wounds of the financial crisis a decade ago.“Employment has continued to rise at a healthy pace, with an increase in the numbers of full-time employees of some 100,000. Moreover, the gradual shift from part-time to full-time employment has continued, as has the shift of activity from self-employment to employee status."These trends all align with a narrative of continued adjustment to normality following the severe labour market disruption of the recession and slow recovery.“The data on pay continue to be encouraging. On the preferred three month measure, total pay rose at an annual rate of 3.3 per cent in October, up from 3.1 per cent the previous month. The less reliable single month estimate indicates growth of 3.9 per cent - though this should be treated with caution because the base figure in October 2017 appears low."Nonetheless there does now seem to be some momentum building behind pay growth and real pay is now consistently growing – albeit still at a rate slower than the historical trend. This is likely to factor into Bank of England decisions on interest rates over the coming months, alongside the uncertainties surrounding Brexit.”Ben Keighley, director of the social recruitment platform, SociallyRecruited.com, added: "Politically, we are in about as precarious a position as we could be, but the jobs market at least is providing considerable economic support.“Employment levels are at record highs and economic inactivity at all-time lows, which is about as firm a footing as you could hope for as we enter 2019 and the unknown it brings.“In one respect, the UK jobs market has become a victim of its own success. Economically, the employment rate being so high is a cause for celebration, but in our experience it is starting to cause a recruitment headache for a growing number of UK employers.“Finding the right people in a market where so many are in work is no small challenge. There is a dearth of active job seekers that is increasingly proving a drag on many companies’ growth ambitions."Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Global Mobility Toolkit download factsheets resource centreAccess hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online DirectorySubscribe to Relocate Extra, our monthly newsletter, to get all of the international assignments and global mobility news.