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New UK Minimum Wage Weighing On Hiring

LONDON (Reuters) – Concerns among British employers about a new, higher UK minimum wage are contributing to a sharp slowdown in hiring via recruitment firms, according to a survey published on Thursday.

The number of people hired last month for permanent jobs via placement companies grew at the slowest pace since early 2013, when Britain’s economy was just starting a recovery, the Recruitment and Employment Confederation (REC) said.

REC Chief Executive Kevin Green said the introduction of the higher minimum wage from April next year was causing companies in some sectors to think about investing more in automation.

“This might have a positive impact on UK productivity, but it could also put the brakes on employment growth,” he said.

Chancellor of the Exchequer George Osborne has said the minimum wage will rise by 40 percent by 2020. Britain’s budget forecasters expect the change to cost a relatively low 60,000 jobs.

Green also said employers were struggling to find qualified workers and that the government should help firms bring in skilled employees from other countries.

“This is now at a critical stage in the construction and engineering sectors, constituting a major threat to planned rail upgrades and house-building projects,” he said, referring to some of the government’s priority areas for investment.

The survey, which is sponsored by accountants KPMG, showed starting salaries for permanent hires grew at the weakest rate in 20 months. That contrasts with stronger growth in recent months in Britain’s official measure of earnings.

Wage growth is a key factor for the Bank of England (BoE) as it gauges when to raise interest rates from their crisis-era record low so it can keep future inflation in check. The BoE is expected to say on Thursday it is keeping rates at a record low.

(Reporting by William Schomberg, editing by David Milliken)

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