Britain’s job vacancies hit record high of 1.2 million

The number of job vacancies in the UK hit a record high of 1.2 million in September as Britain grapples with a chronic labour shortage.

British companies pushed the number of workers on payrolls above pre-pandemic levels last month, with a rise of 207,000 taking the total to a record 29.2 million in September, according to the Office of National Statistics.

Meanwhile, unemployment fell to 4.5 per cent in the three months to August, down from its pandemic peak of 5.2 per cent at the end of last year, however this is still above the 4 per cent recorded at the start of 2020.

Chancellor of the Exchequer Rishi Sunak described the employment landscape as “encouraging” as the government moved into the next stage of its Job Support Programme.

“The number of expected redundancies remained very low in September, there are more employees on payrolls than ever before and the unemployment rate has fallen for 8 months in a row," Mr Sunak said.

Earlier this month, the Treasury committed an extra £500 million in fresh job support funding, with a focus on getting people into new or better jobs.

Britain’s labour market has been plunged into the spotlight in recent weeks, as a number of high-profile shortages in key areas led to supply chain chaos and concerns of a spiral in wages and prices.

Looking at the quarterly figures, vacancies hit 1.1 million between July and September, with the retail sector and motor vehicle repair reporting the largest increases.

Other sectors facing a shortage of workers include accommodation, food services, professional activities and manufacturing.

The employment figures suggest the robust recovery will absorb many of the 1 million workers who remained on furlough until the government ended the programme last month.

Meanwhile, underlying wage growth rose to between 4.1 per cent and 5.6 per cent in the three months through August, well above the 3 per cent seen before the pandemic.

That indicates price pressures in the economy that have started to concern the Bank of England, with policymakers saying inflation will top 4 per cent later this year, double central bank's target, and will probably prompt a tightening in monetary policy with an interest rate rise.

“The further strengthening of the labour market in August may prompt some members of the Monetary Policy Committee (MPC) to put more weight on the upside risks to inflation rather than the downside risks to economic growth,” said Paul Dales, senior UK economist at Capital Economics.

“As such, these data increase the chances of a rate hike in the coming months.”

Hussain Mehdi, macro and investment strategist at HSBC Asset Management, said inflation concerns and a decent October jobs report "could open the door to a hike as soon as the December meeting".

Prime Minister Boris Johnson on the other hand paints the jump in vacancies as a positive story for Britain, casting it as part of the economy’s transition away from the European Union.

However, Yael Selfin, chief economist at KPMG UK, said labour market shortages could “stunt” the UK’s economic recovery from the pandemic.

“The recovery is testing the capacity of the economy to adjust to a new post-pandemic environment, a task made more difficult by the reduced availability of overseas workers,” said Mr Selfin.

Separately, British shoppers increased their spending in September at the slowest pace since January amid fears over a shortage of fuel, according to the British Retail Consortium.

Retail spending lost more momentum last month, rising by just 0.6 per cent compared with September 2020, much weaker than August's 3 per cent increase.

"There are signs that consumer confidence is being hit as the fuel shortages, combined with wetter weather, had an impact in the second half of the month," BRC chief executive Helen Dickinson said. "This had a bigger effect on large purchases such as furniture and homeware."