Over 1,400 business people from all regions of the UK have been surveyed to understand the impact of rising employment costs on the business community.
The results have revealed that a number of developments in the sector have increased the cost base of businesses, which could potentially lead to reduced opportunities for investment and wage growth.
Alongside the likes of the Apprenticeship Levy, three quarters (75%) of businesses have also reported an increase in costs as a result of pensions auto-enrolment, with nearly a quarter (23%) indicating a significant increase.
With a forecast that the National Living Wage will increase to £8.75 per hour by 2020, 38% of respondents suggested that they would raise prices of products and services, and a further 25% are expecting to reduce pay growth.
“Businesses are facing the challenge of maintaining profitability while remaining price competitive,” says David Williams, Director of Corporate Engagement at Middlesex.
“This is a tough balance to achieve during what is an uncertain period, and we are seeing many start to tighten their belts and pull back investment.
“We need to top up our productivity to enable us to compete globally in a post-Brexit Britain, so it is important when making difficult choices that the development, upskilling and retention of the workforce is high on the list of investment priorities, and for businesses to get the support they need to do this.”
Jane Gratton, Head of Business Environment and Skills at the BCC, says, “Businesses are under increasing pressure from the burden of employment costs, and this will influence the choices they make and outcomes for employees.
“Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people.
“Our survey shows that two thirds of businesses will need to take action in response to proposed increases in the National Living Wage over the next three years. Firms are most likely to respond by raising prices or adjusting employee pay growth and wider benefits.
“Increasingly, manufacturers are looking towards greater use of technology and automation. There comes a point at which rising employment costs can no longer be absorbed through reduced profits.”
The online survey took place between 17 July and 1 August 2017, with 96% of businesses surveyed SMEs, 29% operating in the manufacturing sector, and 71% operating in the services sector.
Read more about the Workforce Survey 2017.