Official figures showing falling wages are masking booming pay deals for white-collar construction employees and other professional jobs that will spread to other parts of the economy, the boss of one of Britain's biggest recruiters has said.
Construction firms are paying inflation-busting salary increases to architects and other professional staff because of competition for their services, said Alistair Cox, the chief executive of Hays.
"The construction and property industry is doing well for us. About half the firms we deal with, and there are hundreds if not thousands, have lifted salaries by 5%.
"They are paying a bit more to bring on an architect or to keep a quantity surveyor because we are seeing counter-offers. If people are confident enough to change jobs then employers are confident enough to pay more to keep them," Cox said as Hays announced its annual results.
Some housebuilders are taking on tradesmen such as bricklayers because there is a shortage of workers with such skills available through subcontractors. This is pushing up wages in those trades, Cox said. Elsewhere in the construction industry, big infrastructure projects outside London – such as the new stadium for premiership side Liverpool and planned transport improvements between Lancashire and Yorkshire – are also increasing demand for staff, he said.
The Bank of England has said it will not increase interest rates until there are clear signs that wage increases will strengthen. Its deputy governor Ben Broadbent said at the weekend that "people have become more adapted to lower pay awards". The Bank halved its forecast for 2014 wage growth to 1.25% this month as the Office for National Statistics revealed that wages had fallen for the first time since 2009 between April and June with inflation at 1.9%.
Cox said the wage pressures in construction were spreading to other professional sectors and would continue to do so.
"In accountancy and finance we are also seeing offers above inflation and about half the companies we deal with have increased general salaries by more than inflation. We are going to see that wage inflation spreading to sectors like engineering and technology and a general ripple effect in other parts of the economy. There will be wage pressures in a number of industries and policymakers need to understand that detail."
Hays's pre-tax profit for the year ending 30 June rose 12% to £140m. Profit from continuing operations, stripping out the effect of the strong pound, was up 20%.
The UK and Ireland was the recruitment firm's strongest market with net fees increasing by 11% and operating profit jumping from £5.6m to £26.2m. Business was solid across the country and particularly in Scotland and Northern Ireland, the Midlands, the north-west and the south- east.
Hays cut its dividend three years ago because its profits were not big enough to cover the payout adequately. It increased the 2014 dividend by 5% to 2.63p, the first rise in about eight years, and promised to return excess cash to shareholders after debts were paid off this year.
"The results we have put out are the best we have had in my seven years as CEO," Cox said.
