In this paper the applicability of spatial continuous wavelet transform (CWT) technique for damage identification in an aluminium beam with a mill-cut damage is analysed by application of different types of wavelet transform and scaling factors. The proposed method uses exclusively mode shape data from the damaged structure for wavelet transform. To examine limitations of the method and to ascertain the sensitivity of the method to noisy experimental data, several sets of simulated data are applied. Simulated test cases include numerical mode shapes corrupted by different levels of random noise as well as mode shapes with different number of measurement points used for wavelet transform. Validity of the proposed method is assessed by comparing the damage identification results of the simulated test cases to the results obtained from the experimental test case. The modal frequencies and the corresponding mode shapes are obtained via finite element models for numerical simulations and by using a scanning laser vibrometer SLV with PZT actuator as vibration excitation source for the experimental study.