The offices of global financial institutions stand in view of attendees at the Confederation of British Industry (CBI) Annual Conference in London, U.K. (Photographer: Jason Alden/Bloomberg)  

U.K. Private-Sector Pay Set for Biggest Increase Since 2012

(Bloomberg) -- U.K. private-sector workers are set for their biggest wage increase in at least seven years as companies struggle to fill vacancies.

The Chartered Institute of Personnel and Development said Monday the expected median pay award has risen to 2.5 percent, the highest since it began the survey in 2012 and above the rate of inflation. Almost three quarters of employers questioned said they were finding it hard to recruit people.

The findings underscore the health of the U.K. labor market, with employment at record levels even though economic growth has slowed sharply since the summer amid fears that Britain could leave the European Union without a deal in place to cushion to blow.

One theory is that firms are choosing to hire staff rather than invest in machinery and equipment, as it would be easier to cut staffing levels in the event of a Brexit-induced downturn. Official figures Tuesday are expected to show average earnings growing at their fastest pace since the financial crisis and unemployment holding at a 43-year low.

“Employers are telling us that recruitment is challenging,” said Jonathan Boys, an economist at the CIPD. “An increasing proportion of vacancies are hard to fill and employers, especially in the private sector, are responding to recruitment difficulties by raising starting salaries.”

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