Businesses under pressure as costs soar

3 in 4 businesses have seen their overheads shoot up as a result of auto-enrolment, according to a survey from the British Chambers of Commerce (BCC).

Speaking to 1,461 firms around the UK, the BCC found 23% of respondents indicated a “significant increase” in costs related to providing workplace pensions.

More than 7.5 million workers are currently saving into workplace pensions after auto-enrolment was introduced in October 2012.

Other factors, such as increases to the national living wage (NLW) and the apprenticeship levy, also piled the pressure on businesses.

1 in 5 firms felt costs increase following the introduction of the apprenticeship levy in April 2017, while a further 8% felt the pinch from the immigration skills charge.

National Living Wage – the impacts

The NLW increased to £7.50 an hour for employees aged over 25 in April 2017. This hourly rate will rise to £8.05 in April 2018. 

This year’s NLW rise increased costs for 73% of consumer-facing industries, including those businesses in wholesale, retail, accommodation and food sectors. 

Costs also went up, albeit on a lesser scale, for 56% of manufacturers and 41% of B2B services. 

In addition, businesses in northern England (55%) and the Midlands (51%) were more likely to be impacted by the NLW hike, compared to firms in southern England (43%).   

Absorbing future costs

With the NLW estimated to reach £9 an hour by 2020, most businesses are planning ahead to consider ways to absorb future costs. These include:

  • raising prices of products and services (38%)
  • reducing pay growth (25%) 
  • reducing staff benefits (21%)
  • scaling back recruitment (20%)
  • hiring employees on flexible contracts (15%).

If you would like advice in planning your business finances please contact your local Lentells office.