Labour shortage worst for 25 years

THE THREAT of a shortage of unskilled labour is at its most extreme for 25 years, according to a report yesterday that will raise fears that the jobs market is overheating.

The number of manufacturers warning that recruitment difficulties could hit their businesses has hit levels not seen since 1974 - higher, even, than the boom of 1989, the last time the survey recorded major unskilled labour shortages.

Earlier this month the Bank of England warned that there was a danger the labour market was overheating, and some economists believe there is a chance the Bank will hike rates next month - the first time since June 1998.

The Confederation of British Industry (CBI), the employers' organisation, said firms were worried that shortages of semi- and unskilled labour would hit output in the next four months.

Kate Barker, the CBI's chief economist, said the level of concern was "surprising" but said it could not be dismissed as rogue data. "We believe it is because of the situation in parts of the South, but we were surprised it was not offset by job losses in the North," she said.

The most recent detailed unemployment figures show the number of people claiming benefit in parts of the South -east has fallen to as low as 1 per cent. On this measure, Newbury in Berkshire and Crawley in West Sussex have unemployment rates of 1.1 per cent, Basingstoke in Hampshire and Guildford in Surrey have 1.2 per cent.

But towns in industrial areas of northern England suffer high jobless rates. Hartlepool has 11.5 per cent, Liverpool 8.7 per cent, Bridlington and Workington 7.5 per cent, and Doncaster 7.6 per cent.

The CBI found businesses were almost as worried about shortage of manual workers as they were about difficulty in recruiting skilled employees.

But the British Chamber of Commerce said the shortage was spread across the country. Its latest survey showed 22 per cent of its members had experienced difficulty recruiting semi-skilled and unskilled workers - the second highest figure since 1989. But it revealed the worst area was Merseyside, where the number of firms with problems stands at 47 per cent. Scotland, the North, North West and Yorkshire also reported difficulties.

The chamber's chief economist, Ian Fletcher, said: "We have seen a hell of a lot of growth in the services' sector where up to 400,000 jobs have been created over the last year or so. Perhaps there are `nicer' jobs in the services sector that people can get, which is making filling these less attractive jobs more difficult for firms to do."

The Engineering Employers Federation said there had been 56,000 job losses in its sector since the start of the year and it is forecasting a total of 100,000 this year. But its spokesman, Mark Swift, agreed with the CBI survey, saying: "Certain regions and sectors within engineering are anticipating shortages of labour, but there are other regions and traditional sectors, such as mechanical engineering, where the job losses are concentrated."

Adam Cole, an economist with HSBC, said the increasing recruitment difficulties were a "cause for concern" and showed the "general tightness of the labour market".