LONDON (BLOOMBERG) - British companies are scaling back their ambitions in response to chronic labour shortages that show few signs of abating, an employment group has warned.

The report by the Recruitment and Employment Confederation and KPMG found that job vacancies and placements both slowed in May, possible signs that employers are starting to "rethink their growth plans because of skills shortages, which are proving difficult to fix as quickly as they need".

The warning underscores the degree of exasperation felt by many companies at not being able to hire despite dangling bumper pay increases - and the potential cost to the economy in unrealised potential.

"The initial effects... have been obvious, particularly the driving up of starting salaries," said Ms Claire Warnes, head of education, skills and productivity at KPMG. "However, perhaps we are starting to see wider consequences of the systemic issues in the available workforce to support the growth opportunities which employers are chasing."

The survey, published on Friday (June 10), found that the downturn in candidate supply eased only slightly last month, with recruiters partly citing the reluctance of people to apply for new roles due to increased economic uncertainty. A lack of foreign workers was blamed by those trying to fill temporary roles.

Amid the crunch, starting-salary inflation remained close to record highs. This will keep alarm bells ringing at the Bank of England, where inflation fighters are worried that firms will keep raising prices if they are unable offset the rising cost of labour and raw materials by boosting productivity.

Job placements rose at the slowest pace for over a year, while growth in vacancies hit a three-month low.