Image copyright PA

Severe staff shortages are leading to rapidly rising starting salaries for those moving into new jobs, according to new research.

Employers are paying more "to attract the right people", the Recruitment and Employment Confederation said.

Salaries for workers moving into new permanent roles rose at their fastest rate for three years in May, the REC found.

Pay for workers moving into temporary jobs also continued to rise.

The REC's report is produced by IHS Markit and based on data from 400 UK recruitment and employment consultancies across all sectors of the economy.

This year it has shown an increase in demand for both permanent and temporary staff. But the data also pointed to a continued fall in the number of suitable candidates available.

Tom Hadley, REC policy director, said the rise in appointments meant employers were feeling confident, but a lack of candidates remained a major challenge for recruiters - particularly in areas such as nursing, engineering, manufacturing and IT.

He said staff shortages were becoming "business critical" in many key sectors and employers were having to "radically re-imagine" the way they recruit staff.

While in recent months employers had resorted to paying higher salaries to attract suitable candidates, Mr Hadley said it was time they considered other ways to achieve this such as more flexible working environments and better progression opportunities.

"Government can help by ramping up the UK skills base and ensuring a balanced and evidence-based immigration system," he added.

Gear change

The CBI, which representing employers, said salaries across the economy were rising only gradually when those staying in their existing jobs were included alongside those taking up new jobs - who tend to see faster salary rises.

Rain Newton-Smith, CBI chief economist, said it remained a puzzle as to why a shortage of skilled labour had failed to translate into greater wage growth.

While some areas such as engineering were seeing above inflation wage rises, salaries were not yet increasing rapidly across the economy.

The CBI's June economic forecast, published on Friday, suggested the UK risked remaining "in the slow lane" for economic growth, while other economies "motor ahead".

It said the economy could "shift up a gear" if the UK focused on improving productivity and taking advantage of the weak pound to boost exports.

The CBI is predicts economic growth of 1.4% for 2018 and 1.3% in 2019, down slightly from the 1.5% growth it predicted at the end of last year, in part due to the freezing weather this winter.