The fall-out from Covid has collided with Brexit to bring an end to one of the worst runs for wage growth in UK history, with business across all industries reporting a lack of suitable applicants.

Empty supermarket shelves, restaurant closures, delays in deliveries and warnings of Christmas shortages have ensued. So too have ominous predictions of an inflationary spiral fuelled by wage increases, with average weekly earnings up 8.8 per cent in the three months to June, while the headline rate of inflation jumped by a record 1.2 percentage points to 3.2% in August.

Both of those figures, however, deserve a further bit of unpicking. In the case of wage growth, the numbers have been artificially inflated by the pandemic, with the disproportionate loss of lower-paying jobs and the return of workers from furlough amplifying the increase. Minus those distortions, the Office for National Statistics (ONS) reckons weekly earnings are growing at a pace of somewhere between 3.5% and 4.9%.

Looking at latest reading on inflation, the ONS said higher prices in transport, restaurants and hotels – and the increasing cost of food and drink – were the primary culprits. This was exacerbated by the comparison to last August, when the “eat out to help out” scheme kept restaurant prices artificially low.

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That said, there is no doubt it’s now a seller’s market for workers: signing bonuses have become increasingly commonplace, while hotels such as Arran’s Auchrannie Resort are offering customers £1,000 in vouchers if they help it find new employees.

With “staff wanted” notices now vying for dominance with “for sale” signs on the high street, blue-collar wages look set to emerge from two decades of stagnation in what many would say is a long-overdue development. Despite recent surges, official figures show that inflation-adjusted pay for all workers, including bonuses, was £521 per week in July – still £1 shy of that immediately prior to the banking crisis in February 2008.

The question now is how long these labour shortages may last. With an estimated 1.2 million European workers having left the UK since the pandemic began, employers’ groups such as the CBI have been calling for a loosening in visa requirements to help fill gaps in sectors such as haulage, where there is a shortage of some 100,000 lorry drivers.

They further argue that with the number of permanent staff across the UK back to pre-pandemic levels, the end of furlough on September 30 will not be enough to redress shortages that pushed unfilled job vacancies in Britain to a record high of more than one million during the three months to August. Suren Thiru, head of economics at the British Chambers of Commerce, described it as an “acute hiring crisis”.

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"With Brexit and Covid-19 driving a more deep-seated decline in labour supply, the end of furlough is unlikely to be a silver bullet to the ongoing shortages," he said. "These recruitment difficulties are likely to dampen the recovery by limiting firms' ability to fulfil orders and meet customer demand."

As of July 31, a total of 1.6 million jobs were at least partially reliant on the government’s employment support scheme, including 820,000 fully-furloughed jobs. A large proportion of the latter are in the travel and tourism sectors, which have yet to mount a meaningful recovery from the pandemic.

Economists are far from unanimous on what impact the end of furlough will have. The EY Item Club has declared a “low risk” of a significant jump in unemployment. Capital Economics predicts labour shortages will begin to wane within the next six to 12 months.

On the other hand, chief UK economist Samuel Tombs of Pantheon Macro argues that the end of furlough will lead to an increase in both unemployment and under-employment.

“About 60% of staff on furlough are attached to small businesses employing fewer than 20 people, who are unlikely to have the financial strength to re-employ them for all their pre-Covid hours,” he said. “And while job vacancies rose to a new record high in August, vacancies are skewed towards different industries to those which have used the furlough scheme the most, pointing to a need for people to retrain before they are re-employed.”