Scarcity of candidates drives Scots salaries higher

The ongoing “scarcity of suitably-skilled labour” drove a further increase in permanent starting salaries in Scotland during March, according to the latest Royal Bank of Scotland Report on Jobs survey, compiled by S&P Global.

March data revealed a fall in permanent candidate availability in Scotland, thereby extending the current run of decrease to 38 months. Despite the rate of contraction in permanent staff supply easing to the weakest since mid-2023, it remained sharp overall.

In contrast, the supply of permanent staff expanded across the UK as a whole, the rate of growth ticking up to a four-month high.

“Average starting salaries for permanent new joiners rose across Scotland in March,” said the report.

“Labour shortages and increased bids to secure suitably-skilled candidates exerted upward pressure on pay, noted panellists. That said, the rate of inflation moderated notably to the weakest in just over three-years.

“Salaries awarded to new permanent joiners also rose at a weaker pace across the UK as a whole. Moreover, the pace of inflation was softer than that recorded for Scotland.”

The report signalled a sustained deterioration in permanent staff placements across Scotland during March.

“Although the rate of decline eased from the month before, the number of people placed into permanent roles fell rapidly,” said the report.

“Demand for both permanent and temp workers also deteriorated sharply and for the eighth successive month …

“Scottish recruiters recorded a fourth consecutive monthly fall in permanent staff appointments during March.

“The rate of contraction eased slightly from February’s 15-month high but remained rapid overall.

“According to respondents, the latest downturn was linked to fewer vacancies, companies looking to cost-cut and increased market uncertainty.

“Permanent placements also fell at the UK level, although at a softer pace than that seen in Scotland.”

Recruiters across Scotland recorded an eighth consecutive monthly fall in the number of permanent vacancies in March.

Despite easing for the second straight month, the rate of decrease remained sharp and steeper than the UK-wide average.

Demand for permanent staff deteriorated across all the eight monitored sectors, with Hotel & Catering recording the fastest drop in permanent vacancies.

Sebastian Burnside, Chief Economist at Royal Bank of Scotland, said: “Latest survey data highlighted that uncertainty regarding the outlook and firms looking to cut expenses impeded hiring activity.

“Additionally, demand for both permanent and short-term workers worsened for the eighth successive month, with recruiters recording fewer jobs available across Scotland.

“Meanwhile, though scarcity of suitably-skilled labour drove a further increase in permanent starting salaries during March, worsening hiring conditions meant pressures on pay eased.

“The rates of both starting salary and hourly wage inflation trended below their respective long-run averages.”