Why tech pay could be rising faster (but isn't)

City firms are resisting the urge to fork out sky-high salaries for tech talent, despite being in the clutches of the bleakest ever skills shortage.

"This is the worst probably ever, but certainly the greatest since the good-old 1999 dot.com days," said Laurie Boyall, managing director of financial services headhunter, McGregor Boyall.

Salaries are up 20% on last year's already buoyant market. Job seekers can expect to boost their salaries an average 8-9% with each job move, said Boyall.

But pay isn't reaching the hysteria levels of pre dot.com era, when "everyone was paying silly money" to recruit staff, said Boyall. Instead banks are using outsourcing to mop up demand for lower-skilled roles and enticing staff with bigger bonuses rather than salaries.

Simon La Fosse, director at recruitment firm Harvey Nash says that the market is very aggressive at the moment. One modest-sized financial services client is looking to offer a 300,00 pay and bonus package for the right candidate.

"The City exaggerates those supply and demand curves. Users are more demanding and if you're making millions a day then you will pay for people," said La Fosse.

Boyall contends that the shortage is biting hardest in the front-office and particularly for roles requiring highly complex maths calculations for algorithmic trading. As buy-side now vies for sales in importance this has also upped competition for skilled staff.

Despite the squeeze, only candidates from defence or telcos are likely to have the real-time and mathematical rigor necessary to break into the finance markets.

Tech skills are in short supply in all industries, but finance is suffering more acutely because of the number of staff it needs. A new study by the National Computing Centre finds finance firms employ 75 IT staff per 1,000 users compared with a cross-industry average of 28.