AN increasing labour shortage is ramping pay increases in the south to record highs, a new report reveals.

Latest data shows demand for permanent staff in the region has continued to rise markedly, with the number of people placed in permanent jobs rising for the thirty-third month in a row.

Similarly, temp demand increased at the fastest rate in six months, albeit at a rate which remained weaker than the UK average.

But at the same time supply of staff available for permanent positions has declined for the twenty-second month running.

The upshot of this is that wages and salaries for new permanent jobs have accelerated for the third month running in April to a survey-record high.

The findings come within a report by the Recruitment and Employment Confederation (REC) and Southampton based auditing and tax firm KPMG.

It found that permanent salary growth in the south was also the sharpest among the four monitored English regions.

The rate of increase in wages for temporary staff in the South also rose markedly in April.

KPMG office senior partner Will Smith said: “The declining pool of available labour continues to force pay up in the region. With two in five recruiters reporting falling candidate availability, spiralling salary growth remains a concern as businesses bid against each other to secure skilled staff.

“Salaries have now reached record heights in the south, creating concerns that a pay bubble is emerging, which simply isn't sustainable.

“However, while the highest paid are benefiting from the recovery, demand for permanent staff remains more muted in the manufacturing sector. This section of the market is often the first to stall in tough economic conditions and the last to recover, emphasising the divergent fortunes facing job seekers in today's market.”

REC chief executive Kevin Green said: “We urge the new government, whatever its complexion, to start to tackle the UK's looming jobs crisis.

“For almost two years we've seen month on month increases in the amount of people getting permanent roles. We've also seen higher numbers of vacancies being posted by businesses as they seek to capitalise on increased demand.

“This is good for job seekers, because we continue to see starting salaries increase as employers compete for talent. However we question how sustainable this jobs boom is as skill and talent shortages become rife. The availability of staff has been falling for almost two years, with 40 per cent of recruiters saying that the situation is getting worse month on month.

“Our new government needs to get to grips with this crisis by improving vocational education, providing quality careers advice for all, and ensuring a sensible approach to immigration to help business find the skills they need to compete and win.”