Engineering and construction firms are the worst hit by the skills shortage, according to May's Report on Jobs, produced by the Recruitment and Employment Confederation (REC) and professional services firm KPMG. The report draws on survey data provided by recruitment consultancies and employers.

May's Report on Jobs survey signalled that inflation of permanent staff salaries reached its highest level for 83 months, underpinned by hardening demand for staff and increased skill shortages. Meanwhile, growth of permanent placements and temp billings remained strong, despite easing slightly since April.

An REC spokesperson said: "With skills shortages at an all-time high, employers with vacancies have no choice but to think laterally to respond quickly to ongoing resourcing needs. Within this context there is growing recognition for the crucial role played by temporary and contract workers within all sectors of the UK economy. Flexibility and responsiveness are crucial to the competitiveness of UK plc and to the performance of public sector organisations."

All eight categories of permanent employment monitored by the survey registered improvements in demand during May. The strongest rise was recorded for engineering and construction, with growth reaching its highest level for nine years, The weakest increase was observed for blue collar staff. The engineering/ construction index stood at 71.1, compared with 57.2 for blue collar. An index of 50 means no change.

Similarly, in the temporary market, engineering/ construction's index was 65.4, making it the fastest-growing sector. Executive/professional was the slowest-growing sector, but is still going in the right direction, with an index of 55.6.

Michael Carter, people services partner at KPMG, said: "This month, engineering/construction is the fastest growing sector in the labour market. Already, we are witnessing the increased use of immigrant workers to supplement the UK workforce, who now occupy a wide variety of roles both permanent and temporary. Under plans announced by immigration minister Liam Byrne, the use of these workers will be tightly controlled from early 2008 bringing more pressure on engineering and construction businesses, which are already under considerable pressure to deliver projects on time."

Availability

The availability of candidates to fill permanent vacancies declined for a 43rd consecutive month in May. Furthermore, the rate of deterioration accelerated to the sharpest since July 2006. Only 13.6% of respondents said the availability of candidates for permanent vacancies was higher than it was a month earlier, while 33.1% said it was lower, giving a net balance of -19.5.

The availability of candidates for temporary/contract work fell for the sixth month running in May, with the latest fall the most marked since December 2005.

Inflation of permanent staff salaries strengthened further in May, posting its highest level for 83 months. Around a third of consultancies signalled an increase in salaries during the latest survey period, which they mainly attributed to a shortage of quality candidates.

Recruitment agencies reported strong growth in the number of people placed. The market for permanent placements has now been growing for four years. Panellists attributed higher placements to a further expansion of job vacancies. The report said: 'The rate of expansion of permanent appointments remained robust, despite easing to a three-month low.'

The number of permanent staff placed was higher than a month ago for 43.2% of the respondents, and lower for 26%, giving a net balance of 17.3%. The growth index was 59.4. Growth in temporary/contract billings eased slightly from April's nine-year high of 62.4, to 61.8.



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