The cost of doing business in the UK has soared over the past 20 years, with an average annual wage in 2015 rising by around £1,200, according to the latest official figures.
The Office for National Statistics (ONS) reported the figures in its latest quarterly UK labour market survey, which comes after the Office for Budget Responsibility (OBR) reported last month that wages had fallen by £100 billion over the last three years.
However, the OBR report has revealed that there was a slight rise in wages in the first half of this year as firms adjusted to the impact of Brexit, which it said was partly due to an increase in “flexibility” in terms of how the government was compensating employees for redundancy.
The latest figures also show that employers are spending £14 billion a year on redundancy payments, which the ONS says is a record high.
But the OBR said there were also signs that some firms are starting to re-energise, as firms seek to keep wages low enough to compete with the cheap labour available in cheaper EU countries.
“This is good news for employers, as the government’s Brexit decision has reduced the amount of work needed to keep the economy growing, and has brought a return to full employment,” the OMB said.
“However, this is not a new development as there is evidence of firms re-orienting towards new markets, and more importantly, to the UK.”
It is unclear how many firms have already been re-thinking their investment strategies, with the ONs data showing a clear divergence between firms’ investment decisions and their spending on redundancy.
“The OBR has also recently indicated that the UK economy is becoming more flexible, meaning firms are less focused on keeping costs low in order to keep their business going,” the ONSB said.
However the ON SAB found that firms are spending more on redundancy than they did a year ago, despite this being an “unprecedented” year for the financial sector.
“In the year to the end of June, the average hourly rate of pay in the financial services sector had increased by 1.1% to £24.80, while the average weekly rate had risen by 4.4% to around £23.60,” the report said.
The ONS said it was “encouraging” that “the number of businesses continuing to employ staff following the EU referendum result has increased, and the number of people being offered redundancy has increased by around a third”.
“However,” it added, “the trend is still downwards.”
“There has been no change in the number or frequency of redundancy claims made by firms.
However, there is a continuing rise in claims for pay and conditions of work.
There has also been a significant increase in claims by employers for benefits, with employers reporting that the level of work that needs to be done to keep people on the payroll has risen by 2.7% in the year ending June 2017.”
The ON Sab also said there has been “a marked increase” in “inadequate” and “under-resourced” childcare services across the UK, with “rising levels of unmet need for childcare” across the country.
The OMB noted that there has also “been a rise in the use of private and state sector firms for childcare, with around 2.5 million more children in childcare-related employment in the past year”.
The OBS said it is “encourage[ing] the UK government to deliver a comprehensive and integrated childcare strategy” that will allow the UK to “rebalance childcare spending” with “a more sustainable and secure workforce”.
“As the UK is the only OECD country to have no statutory child care tax credit, we need to ensure that all employers in the economy benefit from this credit,” the organisation said.