Howard Davies, FSA chairman, said yesterday that with more people coming on to the jobs market, the gap that led the authority to underspend its budget by pounds 10m last year was close to being closed. Average pay in the City rose by 5 per cent last year, he said.
"The difficult areas where City salaries have raced away are lawyers, accountants and compliance officers in the securities area. These have been difficult to recruit over the past 12 months," he said.
The SFA head count is now up to 1,800, 4 to 5 per cent below the target of 1,900. Last June, turnover hit 20 per cent. "Mergers and down-sizing have been putting on the market the kind of people we would recruit," Mr Davies said.
The high turnover caused by integrating the various regulators, the move to Canary Wharf and the difficulty in finding replacements has put unacceptable pressure on existing staff and delayed some projects.
The FSA claims to offer salaries competitive with comparable City firms, but it cannot match the large bonus elements of City packages.
The higher staff level means that the control total for the FSA budget next year will rise by 9 per cent to pounds 158.5m, although that figure is just 1.9 per cent higher than the pounds 145m the FSA would have spent if it had had its full staff complement in 1998/99, a fall in real terms. Salaries are the biggest item in the FSA budget, accounting for pounds 104.6m or 66 per cent.
Mr Davies said the costs associated with the move to Canary Wharf were pounds 13m last year, but savings in terms of lower support costs were already being made.
The banks have also gained a one-off saving of pounds 30m as a result of the shift to the FSA's fee-based system.