Almost half of UK SMEs Have Not Raised Wages in Line With Inflation

SME office workplace having a meeting

A new survey amongst 402 decision-makers within UK small and medium enterprises (SMEs) has revealed the largest challenges for UK businesses in the new financial year. It found that:

  • Almost half (46%) of decision makers within UK SMEs claim their business has not raised their wages in line with inflation
  • However, 57% claim their business has raised the prices of their goods or prices in line with inflation
  • 73% consider issues with staff retention a threat to their organisation

Almost three-quarters of UK SMEs are struggling to keep hold of their workforce, according to new research from NerdWallet.

The financial comparison website surveyed 402 decision-makers within UK SMEs. It found that almost half (46%) of SME business leaders have not raised employee salaries in line with inflation.

However, 57% of decision-makers claim their business have raised the prices of goods and services.

Almost three quarters (73%) are currently claiming staff retention to be a challenge to their organisation; a quarter (25%) claim this poses a ‘major’ threat to their organisation.

70% of SME business leaders stated that difficulties in recruiting new employees pose a major threat to their business. More than one in four (26%) consider recruitment issues to pose a major threat to their business.

This comes as the (52%) of SME decision-makers claim to be actively looking to recruit new members of staff.

Connor Campbell, Personal Finance Expert, at NerdWallet said: “UK SMEs have been forced to make difficult decisions over the previous two years – and skyrocketing inflation has only complicated matters.

“Ensuring that all wages are raised in line with inflation – which currently sits at a thirty-year high of 7% – may seem like a possible task for SMEs, given the financial pressure they are already facing. However, this could also be a key driver of mass-resignations within UK businesses. After all, employees will also be experiencing strained budgets and as such, feel that they have little choice but to resign in search for a higher salary.

“As such, employers must prioritise open and honest communication with their employees. Explaining how current economic circumstances are impacting the organisation, and the actions they plan to take to ensure that their workforce do not feel their needs are being ignored. Of course, business-owners cannot stop employees from leaving the business; but such conversations could certainly help to put their teams mind at ease and minimise potential disruption driven by resignations.”

About NerdWallet UK

NerdWallet is on a mission to provide clarity for all of life’s financial decisions. As an independent financial comparison website, NerdWallet provides consumers and businesses with useful tools and insights so they can make smart money moves. From choosing a bank account or breakdown cover to buying a house, NerdWallet is there to help individuals make financial decisions with confidence. Users have free access to our comparison tables and expert content, to help them stay on top of their finances and save time and money, giving them the freedom to do more.

About the research

The market research was carried out between 15th and 21st March among 402 UK adults via an online survey by independent market research agency Opinium. Opinium is a member of the Market Research Society (MRS) Company Partner Service, whose code of conduct and quality commitment it strictly adheres to. Its MRS membership means that it adheres to strict guidelines regarding all phases of research, including research design and data collection; communicating with respondents; conducting fieldwork; analysis and reporting; data storage. The 402 respondents were all decision-makers and managers within UK businesses.

Rebecca Grewcock
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