Thirty percent of manufacturers view rising wage pressures as a risk to growth

Posted on 23 Jan 2012

The issue of employee’s pay ranked fourth in a list of issues concerning manufacturers according to a new survey.

Upward pressures on pay ranked fourth behind a shortage of raw materials, the financial crisis and access to external finance in a survey of over 200 companies by the manufacturers’ organisation EEF and JAM Recruitment.

Out of the companies that were surveyed, 30% regarded significant upward pressure on pay as a risk to growth. However, only 5% regarded it as their most significant risk as the majority of businesses experienced good employee-employer relations.

Although few companies view pay pressure or deterioration in workplace relations as its most significant risk to growth, when the issue is combined with the rising costs of raw materials and difficultly regarding access to finance, the economic environment remains challenging.

Despite this, the figure largely appears to be a fear rather than a current problem for businesses as pay remains settled.

Since the recession, employees have accepted pay freezes and below inflation pay rises in order to ease the burden on employers and keep redundancy figures down. Manufacturing pay settlements are continuing to remain at normal levels as the key bargaining period begins.

Separately, EEF’s latest pay data for the 3 months to the end of December 2011 showed the average pay settlement for the period was 2.4%, a figure below the long term settlement average.

The data also shows that pay freezes have remained around 1 in 6 settlements while the vast majority of settlements are below 3 per cent.

However, EEF cautioned that the survey was based on a smaller sample and that next month’s data will be key as it will include settlements for January, the main bargaining month for manufacturing pay settlements.

Ms Lee Hopley, EEF’s chief economist, said: “Despite increases in the cost of living, pay settlements are continuing to hover around normal levels with a sense of economic realism prevailing.”

“Attention will now turn towards this month’s bargaining round,” added Ms Hopley, “where negotiations will again take place with a very cloudy outlook for the sector in the year ahead.”

John Morris, chief executive of JAM Recruitment, said: “While pay remains stable, sectors like automotive, aerospace and pharmaceutical are showing promise, and this buoyancy is filtering right down their supply chains.”

Mr Morris was more concerned about the skills shortage as a hindrance to growth in manufacturing. “Manufacturing is one of the few sectors we can be optimistic about but finding the talent it needs in order to fulfil demand remains a key issue,” he said.