IoD: Higher wages will stoke inflation

The chief economist of the Institute of Directors (IoD) has predicted severe worker shortages plaguing the UK economy will trigger a sharp rise in prices.

Kitty Ussher, chief economist at the IoD, told City PM she expects “a step-change in wage rates for high-demand skills that will put upward pressure on prices in the short-term.”

The prediction comes as fresh data shows the number of vacancies in the UK have scaled to another record high as worker shortages continue to plague the British economy.

Data from the Recruitment and Employment Confederation (REC) shows there were 1.9m active job ads in the UK last week.

A paucity of workers, compounded by supply chain snarl ups prompting businesses to scramble to get their hands on raw materials, are putting firms across the country in a vice. 

Barriers to delivering normal services are threatening to derail the UK’s economic recovery from the pandemic.  

Neil Carberry, chief executive of the REC, said: “There is a real chance now that shortages of available workers will slow the recovery.”

In a bid to attract talent, firms are hiking wages. However, this is adding to pressures on margins.

The warning comes as the Bank of England raised its inflation forecasts yesterday to over four per cent by the end of this year.