Scots salary inflation at record high amid job boom

Hiring activity across Scotland continued to surge in September, according to the latest Royal Bank of Scotland Report on Jobs from IHS Markit, completing a third quarter of “unprecedented” labour market activity.

“Demand for workers remained strong, as growth of vacancies for both permanent and temporary staff continued to rise rapidly,” said the report.

“At the same time, the availability of candidates plummeted again.

“As a result, pay pressures intensified, with the rate of starters’ salary inflation hitting a fresh survey record.”

Recruiters across Scotland reported a further increase in the number of permanent staff appointments during September, amid reports of strong demand for staff as companies step up hiring efforts.

The rate of expansion was the third-fastest on record.

However, supply of permanent candidates plummeted at near-record pace.

The September data highlighted a sustained decrease in the availability of permanent candidates across Scotland, extending the current sequence of reduction which began in February.

Indeed, the rate of decline accelerated on the month and was the second-fastest on record, behind only August 2014.

Respondents attributed the latest fall to Brexit and ongoing uncertainty among candidates “with regards to switching roles amid the ongoing pandemic.”

For the seventh time in as many months, the supply of temporary candidates across Scotland decreased in September.

COVID-19, a shift among some candidates to permanent roles, and Brexit were all cited by panellists as reasons for the latest fall.

The rate of starting salary inflation hit a new record.

“Scottish recruiters signalled a further steep increase in salaries awarded to permanent new joiners during September, stretching the current sequence of rising pay which began last December,” said the report.

“Notably, the rate of inflation accelerated to a fresh survey record.

“According to respondents, skill shortages had led firms to raise their salary offerings in order to attract candidates.”

The upturn in permanent vacancies remains historically sharp.

“An eighth successive monthly upturn in the number of permanent vacancies across Scotland was recorded in September,” said the report.

“Moreover, the rate of increase eased only slightly from August’s record high and was the second-steepest ever seen.

“The upturn was also stronger than that seen at the national (UK) level.”

Sebastian Burnside, Chief Economist at Royal Bank of Scotland, said: “Scotland saw a further rapid uplift in hiring activity during September, with the rates of increase in both permanent placements and temp billings easing only slightly from the all-time records seen in August.

“This rounded off a third quarter of unprecedented hiring activity as the Scottish labour market continues to rebound.

“Meanwhile, vacancies for both short-term and permanent staff rose at near-record rates during September, but recruiters widely reported skills shortages as the supply of candidates continued to plummet.

“These shortages are likely to become more pronounced over the coming months, and may pose some significant challenges for companies seeking to fill roles and expand their operations.”