Business West, one of the largest Chambers of Commerce in the UK, has published the findings of its latest Quarterly Economic Survey.
The South West chamber found that staff costs remain the leading source of price pressures for 68% of respondents. This is up 4 points since the same period last year and 74% for manufacturing businesses.
However, the report showed a drop in the number of respondents planning to increase prices in the next three months; with 40% expecting to put prices up, falling from 45% in the first quarter of 2023.
Almost 300 businesses from across the South West took part in the survey, with the results revealing that over a quarter of businesses have concerns about the labour market.
Read more: South West sees ‘disappointing’ drop in business activity, NatWest reports
Business West asked employers in the region what the main challenges were in relation to their current workforce. 62% of respondents said they are worried about meeting staff expectations in terms of pay and benefit increases. 37% said that employee retention was a challenge, while 36% cited supporting staff morale and wellbeing.
Chris Payne, senior programme manager at CT Engineering Group, an engineering consultancy based in South Gloucestershire, said: “Our industry is currently going through a period of high staff demand versus a low resource pool. This is driving up wages and affecting profit margins.”
Alan Broadway, owner of Oval Estates Group, a property company based in Bath, said: “Two staff have completed degree courses whilst in full time employment. We are currently recruiting a couple of apprentices and train staff internally as required and send them on training courses.”
Michelle Graham, director of Niche Recruitment, a recruitment consultancy based in Wiltshire, added: “We currently have a team member undertaking a Digital Skills Bootcamp which is partially funded through the government and is proving to be hugely beneficial.”
In addition to recruitment challenges, businesses said that they are struggling with higher costs for new energy contracts alongside reduced government support. This comes as consumer spending is declining and other operational expenses continue to rise.
Business West said that against this backdrop, "it is becoming more challenging" for firms to protect their profit margins and retain cash to invest back into the business. Whilst 47% of respondents said they anticipate turnover to increase in Q3, only 36% predict profits to increase compared to Q2.
Matt Griffith, director of policy at Business West, said: “Businesses are facing persistent labour market tightness and while it is positive to see that firms struggling to recruit has fallen this quarter compared to last, the percentage is almost 10 points up since the same period in 2021, during the depths of the pandemic.
“Fierce competition for skills, wage inflation and candidates’ expectations are leaving many businesses with jobs they can’t fill. There appears to be some way to go before the UK economy has a labour market that is delivering the skills and people to support the long-term economic growth we need.”
Mr Griffith added: “It is important that the Government supports more people back into work while creating the right conditions for employers to invest in skills to help close the gap and allow firms to grow.”
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