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Fifth of businesses to slash investment amid rising inflation

Competition for talent and the rising cost of living have heightened pressure on employers, with 52% raising pay by 4-8%, and 73% of mid-sized businesses increasing pay by 9% or more in London

Over a quarter (28%) are increasing pay by 9% or more, which is in line with or above current rates of inflation, and almost three-quarters (73%) of mid-sized businesses are increasing pay by 9% or more in London.

Some 20% of businesses are putting the brakes on all new investment into their business as many firms have been forced to pause on hiring and growth due to the impacts of inflation and mounting costs, which are the greatest threat to 65% of businesses in the next six months.

According to BDO’s research, recruitment and retention, including hiring costs and a shortage of talent, are a further cause for concern, with almost a fifth (19%) of businesses citing this as the biggest threat they face over the remainder of the year.

However, 29% of business leaders are actively focused on growing their workforce, despite almost a third (31%) of businesses struggling to find staff with the right skills.

Consequently, competition for talent and the rising cost of living have heightened pressure on employers, with more than half of businesses (52%) raising pay by 4-8%.

Over a quarter (28%) are increasing pay by 9% or more, which is in line with or above current rates of inflation, and almost three-quarters (73%) of mid-sized businesses are increasing pay by 9% or more in London.

Additionally, almost half (44%) of businesses are providing one-off bonuses to support colleagues through the crisis, with more than half (52%) offering more flexible working-from-home policies to help employees cut travel costs.

Almost half (46%) have offered new benefits in-kind, such as childcare support, free meals at work or shopping vouchers.

Meanwhile, as businesses struggle to find the talent, a quarter (24%) are reportedly trying to recruit from more diverse backgrounds, while 29% are investing in apprenticeship schemes.

However, despite the demand for talent, some businesses have been forced to press pause on hiring and growth. Almost a quarter (24%) are taking on new debt, while a fifth (21%) are reducing the number of goods and services they offer, 21% are reducing headcount, and 21% are pausing hiring.

Kaley Crossthwaite, partner at BDO LLP, said: “The challenges facing these businesses, which are the engine of the UK’s economy, aren’t going anywhere soon. Inflation and rising costs have placed profound pressure on business leaders. It is particularly concerning to see businesses taking on additional loans and credit to manage costs.

“However, it is encouraging to see businesses focused on increasing the inclusivity of their recruitment strategies, with many investing in apprenticeship schemes or actively recruiting from more diverse backgrounds.”

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