| Staff costs rocket for private firms |
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| Friday, 04 April 2008 | |
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Almost half of privately-owned UK businesses face a major jump in wage cost pressure.
Forty-seven per cent incurred 'significantly' more staff costs (excluding inflation) than a year ago, highlighting the disconnect between financial sector difficulties and the wider economy, according to new research issued by business and financial adviser Grant Thornton. Skill shortages Grant Thornton's International Business Report, which surveyed 7,800 owners and senior managers in 34 economies, including 600 in the UK, also found that half of privately-owned UK businesses (51 per cent) were more, or significantly more, focused on attracting and retaining staff than they were one year ago. This was compared to just 2 per cent who were less or significantly less focused on recruitment and retention than 12 months ago. Alysoun Stewart, head of entrepreneurial advisory at Grant Thornton, said that despite recent job losses in the financial sector, low unemployment figures continued to be reported in the wider economy at present. This suggests that the skill shortages that have been such a challenge for many businesses during the recent period of economic expansion will remain a factor unless the credit crunch precedes a true, and protracted, recession. "With the reports last month of the highest number of people in employment since comparable records began in 1971, coupled with the international fluidity of employment today, companies are being forced to compete on wages despite the prediction of continuing economic uncertainty during the coming financial year," she added. Extremely low wages coming under pressure This inflationary pressure from the rising cost of labour, combined with an increase in the price of raw materials, is also set to create further difficultly for the Bank of England's decision making when it reviews interest rates later this month, as it needs to balance this with alleviating the pressure of contracting credit markets. Rising wage costs are not confined to the UK, however, with 63 per cent of businesses globally reporting a significant increase in the cost of labour since last year. Two of the world's largest economies have seen a major jump in wages, with 91 per cent of businesses in Mainland China and 85 per cent in India reporting a substantial increase. Stewart explained that the research indicated that the extremely low wages that have seen China continue to experience such rapid growth were now coming under pressure. She said that may therefore see an increase in price for the huge range of Chinese products purchased in the UK, placing further inflationary pressure on an economy that has become so reliant on cheap imports. Need for competitive wage rates The study also found, that staff turnover led 36 per cent of UK businesses to experience an increase in operating costs and a quarter of businesses also reported a fall in customer service standards. "In many cases it is cheaper, and considerably easier, to offer a salary rise to prevent staff turnover, rather than paying to rectify problems arising from recruitment and retention issues in the long term," Stewart said. At present UK businesses seem to be more focused on creating awareness and understanding of core values, mission and goals, however, than on developing competitive reward packages. In fact, 65 per cent of UK businesses said ensuring that all employees understand the company's directions and values was a key strategy, compared with 47 per cent who are looking at improving reward structures. "While increasing awareness of values and goals certainly has merit, firms that want to compete effectively on both the national and international stage ignore the need for competitive wage rates at their peril," Stewart concluded. Related articles
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