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British employers are increasingly resorting to bidding wars to retain staff, a survey showed that appeared to contradict recent data suggesting the labor market is starting to cool and wage inflation is slowing.
A quarterly survey by the Chartered Institute of Personnel and Development released on Monday found that 40% of employers have made counteroffers in the past year in an attempt to keep staff who have secured job offers elsewhere.
Of this group, more than half use counteroffers more often than last year, and a quarter expect to use this tactic more often in the year ahead.
The survey, conducted in June and early July, showed that despite a weak economic backdrop, wages continued to grow rapidly as British employers struggled to fill vacancies.
The findings come ahead of official labor market data on Tuesday, which will be closely watched by rate-setters for any clues about the direction of future wage growth.
After raising interest rates to 5.25% earlier this month, the BoE said it would monitor the “tightness of labor market conditions and the performance of wage growth and service prices” for evidence of more persistent inflationary pressures that would require further increases. interest. Increase.
Many analysts believe the labor market is finally starting to cool, with recent data showing a slight increase in the unemployment rate, a decline in job vacancies and fewer employers reporting labor shortages. However, this has yet to lead to a slowdown in wage growth, which rose around 7% in May.
The CIPD said its net employment balance, which measures the difference between employers who expect to increase headcount over the next three months and those who expect layoffs, remained steady at 28, while the proportion of employers planning to lay off workers remained low.
More than two in five employers said their vacancies were difficult to fill, with the worst problems in education, transport and warehousing and across the public sector.
The median expected increase in base pay held steady at 5%, the highest level since the survey began in 2010. However, a growing number of employers say they are unsure whether they will continue to pay increases, which will depend on the performance of their organisations.
Jon Boys, senior labor market economist at the CIPD, said the growing use of counteroffers “reflects a tight labor market” but could also be problematic because they could “exacerbate the pay gap, triggering Equal pay challenges could lead to lower wages.” Employee Engagement”.
Counteroffers are most common in London, but even employers who use them say they have only a short-term impact and are less effective at persuading employees to stay in the long-term.