A “war for talent” has been unleashed in the south-east of England as employers vie with each other to recruit new staff, a report has found.

Starting salaries in the region, which includes the east and south-east excluding London, have risen at a rate not seen since July 1998, according to the Report on Jobs: South East.

The study, which started in 1997, is compiled by financial information services firm Markit using its monthly job survey data from around 150 recruitment and employment consultancies. The report, commissioned by accountancy firm KPMG and the Recruitment and Employment Confederation, found that the availability of permanent candidates dropped at a survey record pace.

The temp supply also showed a rapid decline, and there was a marked growth in permanent placements.

Steve Muncey, senior partner at accountancy firm KPMG in East Anglia said: “Many businesses across the region have realised that under-investment in staff during the downturn has led to a skills deficit and the war for talent is most definitely back.”

But he warned that the solution was “not as simple” as goiing out and re-hiring talen and “splashing the cash”. “Despite offering starting salaries at a rate that has not been seen during the survey’s 17 year lifetime, it is clear that candidates are not easily swayed,” he said.

Despite rising house prices, the desire for extra disposable income was not yet translating into a generation of staff only loyal to their monthly pay cheque. Although many might argue that by offering higher pay packets businesses are showing increased confidence, the truth is that continued starting salary growth is unrealistic and unsustainable over the long term.

“Ultimately candidates are also suggesting this by voting with their feet, because we have also just witnessed the biggest fall in candidate availability for 17 years in the region. Perhaps this means that the productivity gap is being replaced with another chasm ? a vacancy vacuum ? and one that is unlikely to be resolved until employers recognise that, for staff, remuneration is about much more than take home pay.”