Small UK factories say staff shortages add to wage pressure By Reuters – News Couple

Small UK factories say staff shortages add to wage pressure By Reuters

© Reuters. FILE PHOTO: Technicians work on a Rolls-Royce engine before it is fitted into a car on the production line of the Rolls-Royce Goodwood plant, near Chichester, Britain, September 1, 2020. REUTERS/Peter Nichols

By Andy Bruce

A survey on Thursday showed that more than half of small British manufacturers are feeling pressure to pay bigger salaries to employees due to labor shortages caused by the Covid-19 pandemic and Britain’s exit from the European Union.

The report from consultants at South West Manufacturing Advisory Services (SWMAS) and the Manufacturing Growth Program (MGP) shows that most small and medium-sized manufacturers have lost skilled employees during the pandemic.

With only a small minority able to find replacement workers, 60% of manufacturers said they had either had to or would have to raise wages to attract employees.

The Bank of England was carefully monitoring wage pressures ahead of Thursday’s rate decision – a task made more difficult by distortions in official wage data caused by the pandemic.

While wages have risen sharply in some industries such as transportation, construction, and manufacturing, most workers have not seen significant wage increases.

About 40% of respondents to Thursday’s survey cited the shortage of EU workers after Brexit as a major driver behind labor scarcity.

British Prime Minister Boris Johnson said Brexit would help build a high-growth, high-wage economy, backed by new restrictions on immigration.

But economists have warned that wage increases caused by labor shortages will only harm the competitiveness of British firms – unless a way is found to raise productivity, a goal that has proven elusive over the past decade.

Thursday’s survey showed that there are already signs that the cost of supply chain problems and labor shortages are starting to hurt profit margins, even though companies expect future sales to improve.

Nick Golding, managing director at SWMAS, said ongoing supply chain challenges meant many companies had to reallocate and add additional resources to address these issues.

“In fact, respondents currently have to stick to an average full-time supplier and customer management staff, a number often equivalent to 5-10% of the SME manufacturer’s workforce,” he said.

However, 64% of respondents said they expect to expand over the next six months, and 52% said they would invest more in equipment.

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