'Unrelenting' pressure on firms as wage growth surpasses inflation - Chamber

Record wage growth is adding to the “unrelenting” cost pressures facing many businesses, business leaders said today.

New figures released this morning reveal private sector wages and total pay, including bonuses, surpassed inflation despite a surprise rise in the rate of unemployment.

According to the Office for National Statistics (ONS), average weekly earnings, excluding bonuses, hit an annual growth rate of 7.8 per cent during the three months to June, surpassing the highest level on record.

Total pay, including bonuses, also reached 8.2 per cent, above the rate of inflation.

However, unemployment rose by 0.4 per cent nationally and 0.5 per cent in the West Midlands over the year.

At 5.2 per cent, the West Midlands still has the highest unemployment estimate of any UK region.

The region's employment rate also increased by 0.2 per cent to 75.1 per cent since the same period (April to June) last year.

Emily Stubbs (pictured), senior policy and projects manager at Greater Birmingham Chambers of Commerce, said: “Headline indicators suggest that since the start of the year, the labour market in the West Midlands, much like the national labour market, has seen a significant number of previously economically inactive individuals beginning to look for work.

“Unfortunately, while the regional employment rate has increased slightly, the unemployment rate in the West Midlands has risen further, and remains the highest of any region in the UK.

“While increases in pay will be received positively by those in employment, wage inflation, driven by tight labour markets, is further increasing the unrelenting cost pressures many firms are already facing. This will raise concerns about subsequent impacts on broader inflation and interest rates.

“Establishing the right conditions for businesses to invest in local talent, by reducing upfront business costs, enabling more flexible use of apprenticeship funding and facilitating access to rapid, modular training courses is critical to addressing these challenges.

“Leveraging the legacy benefits of the Birmingham 2022 Commonwealth Games also offers local stakeholders a key opportunity to address skills shortages across the region.

“Where business remain unable to access the talent they need in the UK, national stakeholders must ensure that this is reflected in a comprehensive and up to date Shortage Occupation List.”

Read the Chamber's report, 'Birmingham 2022 Commonwealth Games: What Next? Understanding the Legacy for Local Businesses', which analyses the legacy impact of the Games on the region and its businesses.