UK wages likely to fall as an average of 24 applicants chase each low-skilled job

Employers see little incentive to offer big pay rises despite fears of future labour shortages as unemployment hits a more than 40-year low

Strong labour supply may change as more and more skilled workers from EU countries decide to quit the UK (Getty)

Real wages are likely to continue falling despite unemployment reaching a more than 40-year low, according to a new report.

Employers see little incentive to offer big pay rises because they are receiving an average of 24 applications for each low-skilled job, according to the Chartered Institute for Personnel and Development (CIPD).

Firms expect to increase wages by just 1 per cent next year, the CIPD survey found. That’s less than inflation, which came in at 2.6 per cent in June, meaning that the spending power of people's pay will fall if inflation remains at its current level or higher as most analysts expect.

Respondents also reported that there were 19 candidates chasing every medium-skilled vacancy and eight for each high-skilled post.

However, the report stresses that the situation could change because future migration figures are “highly uncertain”. Official data shows that the flow of migrants from the EU, particularly from Eastern European countries, has begun to slow amid concerns around Brexit.

A June survey from law firm Baker Mackenzie found that the majority of skilled EU workers at FTSE 250-listed companies said they were “quite likely” or “highly likely” to leave the EU before the conclusion of Brexit negotiations.

Healthcare will be the hardest hit, with 84 per cent of employees in the sector saying they would leave. Technology, media, telecoms and financial services will also see big losses of talent, according to the survey.

Fear of an impending labour shortage in manufacturing reached a 28-year high according to the results of a separate survey published this month.

The Confederation of British Industry found that small and medium-sized manufacturers had buoyant order books – helped by the weak pound making exports more competitive – but output could be restricted by a lack of skilled staff.

Gerwyn Davies of the CIPD, the professional body for human resources employees, said on Monday: “Predictions of pay growth increasing alongside strong employment growth is the dog that hasn't barked for some time now, and we are still yet to see tangible signs of this situation changing in the near-term.

“The facts remain that productivity levels are stagnant, public sector pay increases remain modest while wage costs and uncertainty over access to the EU market have increased for some employers.

“At the same time, it is also clear that the majority of employers have still been able to find suitable candidates to employ at current wage rates due to a strong labour supply until now.

“The good news is that the UK labour market continues to go from strength to strength.

“This is particularly good news for jobseekers, especially the long-term unemployed, who have recently been able to move into work more quickly than in the past.

“Against the backdrop of future migration restrictions and a tight labour market, the need for a workforce development plan is greater than ever.”