Jump in Employment Costs Threatens U.K. Wage Growth, BCC Says

(Bloomberg) — Almost 80 percent of U.K. businesses have seen their employment costs increase this year as a result of changes in legislation.

Government measures including pensions auto-enrollment, the minimum wage and a tax to encourage more training are pushing up the cost base for companies, the British Chambers of Commerce said Friday, citing a survey of more than 1,400 businesses conducted in partnership with Middlesex University London. That could take a toll on investment and wage growth, the BCC said.

“Businesses are under increasing pressure from the burden of employment costs, and this will influence the choices they make and outcomes for employees,” said Jane Gratton, head of business environment and skills at the BCC. “Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people. ”

Three-quarters of respondents reported an increase in costs as a result of pensions auto-enrollment, with nearly a quarter indicating a significant gain. Based on the forecast that the national minimum wage will rise to 8.75 pounds ($11.22) per hour by 2020, 38 percent of respondents said they would raise prices of products and services, with a further 25 percent expecting to reduce pay growth.

The findings bode ill for U.K. consumers, who are already seeing their meager wage gains outstripped by price gains in the wake of the Brexit vote. A report last week showed basic wages rose an annual 2.1 percent in the second quarter, leaving real incomes down 0.5 percent year-on-year.

That’s keeping a lid on consumer sentiment and slowing their spending. A separate report on Friday from YouGov and Centre for Economic and Business Research showed a gauge of household finances over the past 30 days declined for a fifth month in August — the longest streak since the firm started tracking the data.

The overall index of consumer confidence stood at 107.6, according to the report, a level that, while up from 107.2 the previous month, is still well short of that seen before the Brexit vote.

To contact the reporter on this story: David Goodman in London at [email protected]

To contact the editors responsible for this story: Paul Gordon at [email protected], Brian Swint, Lucy Meakin


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