Three-quarters of SMEs plan to give pay rises next year » SMEInsider

Three-quarters of SMEs plan to give pay rises next year

Good news for squeezed employees: SMEs make up the vast majority of employers in the country, and most expect to raise pay in the next 12 months.

A new survey by the Close Brothers Business Barometer found that 76% of businesses across the country are optimistic about their performance in 2015, with two in five expecting to expand. This, they say, will filter through to employee pay, with 39% saying that they will give pay rises to employees based on merit and 36% planning to raise pay across the board. However, the report did not say how much employers expected to raise wages by.

The trend was strongest in London and the South East, where four fifths of businesses expressed an intention to raise wages, but weakest in East Anglia (65%) and Yorkshire & Humberside (67%).

The shift will likely come as a relief to the UK’s workforce, which has been battling with rising costs and stagnating wages since the onset of recession. Wages rose by just 0.6% in August – the weakest increase since records began and significantly below the consumer price inflation of 1.5% in the same month.

In a statement, Brian Dhenin, Managing Director of the Broker Division at Close Brothers Asset Finance, described the results as “encouraging,” but added: “We should be aware that the Bank of England is watching pay closely, as an indicator of when the right time will be to increase interest rates.”

They’ve also warned that unless wage increases are accompanied by a rise in productivity then they will have to move more quickly on rates as inflationary pressure mounts.”

Last month, the Bank of England’s chief economist Andy Haldane told the Bristol Post that interest rates were unlikely to rise at all until late 2015, and would most likely level out at around 3%.