Wage inflation `still accelerating'

THE UK labour market is tightening and the pace of wage inflation picking up, according to a survey released yesterday.

A jobs report published by NTC Research and the Federation of Recruitment and Employment Services found that wages for permanent and temporary staff grew at a faster rate in May than in April.

The report noted there had been increases in demand for all types of worker. But, it said: "The supply of suitable staff to fill vacancies further diminished [so] both average salaries for permanent staff and temporary and contract pay rates continued to rise strongly."

Strongest demand was for information technology staff, although demand for unskilled workers also rose.

In recent months the rate of wages growth has been one of the Bank of England's primary concerns. Both the Bank and the Government have repeatedly urged wage restraint, particularly in the private sector.

The most recent official figures showed that average earnings rose by 5.2 per cent in the year to March, significantly above the 4.5 per cent "danger level" generally thought of as incompatible with the Bank's inflation target.

The Bank cited strong earnings growth as one of the main factors behind its recent decision to increase interest rates by a quarter-point to 7.5 per cent. Continuing concern about wage inflation may help tip the balance in favour of another rate rise at the beginning of next month, according to some economists.