Businesses are finding it more difficult to recruit, but plan to offer minimal pay rises, amid what the Bank of England described as an increasingly uncertain environment.
Recruitment difficulties edged higher during August, and were gradually broadening across sectors and skill areas, according to the monthly agents’ summary of business conditions. Despite this, labour cost growth was “modest”, with pay rises “clustered around two-to-three per cent”.
The report comes just a day after a report by the Recruitment and Employment Confederation (REC) claimed that Brexit was having a “marked decline” on the number of applicants for roles both permanent and temporary.
The Bank also noted that investment intentions were “modestly positive overall” but that uncertainty around the trading environment was weighing on some firms’ longer-term spending plans.
The Bank’s report was based on conversations with businesses across Britain between June and the middle of July. It was used by the monetary policy committee (MPC), which last week voted 6-2 to keep interest rates at their historically low rate of 0.25 per cent.
The Bank said reduced consumer spending would drag GDP growth to 1.7 per cent this year, down from a previous forecast of 1.9 per cent.
Consumer spending will “remain subdued throughout the next three years”, the MPC added.
Mike Cherry, chairman of the Federation of Small Businesses (FSB), said consumer spending was the major concern.
“Confidence among small retailers has dropped over the first half of the year. A combination of inflationary pressure, business rates hikes and an increase in the National Living Wage has left thousands feeling the squeeze.
“Operating costs for small firms are now at their highest in four years. Many are paying themselves less and further increasing prices in an attempt to handle the strain, leaving all concerned with reduced discretionary spending power.
“This government needs to carefully consider its inaugural Budget. Hikes to stealth taxes, such as fuel duty and insurance premium tax, will place further burdens on our embattled small business owners. It’s crucial that all tax reliefs for our strivers, particularly entrepreneurs’ relief, remain in place as part of fresh legislation. In the meantime, we need to see the 21 August deadline for distribution of revised business rates bills met without any further excuses.”