Andy Bruce

LONDON (Reuters), Almost half of British small-scale manufacturers are feeling pressured by Brexit and the COVID-19 pandemic to increase their staff salaries, according to a Thursday survey.

Consulting firms South West Manufacturing Advisory Services and Manufacturing Growth Programme (MGP), found that most small- to medium-sized businesses had lost qualified staff due to the pandemic.

Only a few manufacturers were able to replace workers. 60% of the respondents said that they would need to raise their pay in order to recruit staff.

Bank of England is closely watching the pay pressures ahead of its interest rate decision on Thursday. The task was made even more challenging by distortions of official pay data that have been caused by pandemic.

Although wages in certain industries, such as construction, haulage and manufacturing have seen a sharp rise in their value, the majority of workers have not experienced significant pay increases.

Nearly 40% of Thursday’s respondents cited the shortage of workers from the European Union as one of their main reasons for low labour supply.

Boris Johnson, British Prime Minster, stated Brexit would help build a high-growth and high-paying economy. He also said that new restrictions on immigration will be helpful.

Economists warn that wage increases due to labour shortages could hurt British businesses’ competitiveness – unless there is a way to increase productivity, which has proven difficult over the past decade.

The survey on Thursday showed that there were signs suggesting that supply chain issues and labor shortages have already started to impact profit margins. However, companies still expect to see future growth.

According to Nick Golding who is managing director of SWMAS, many companies have been forced to redeploy and increase their resources because of the continuing supply chain issues.

He stated that respondents currently have to hire two employees full-time to handle suppliers and customers. This number often amounts to 5-10% for a SME’s workforce.

64% said that they expect to grow in the next six-months, and 52% stated they will invest more money into equipment.