Unexpected business costs hitting wages, says FSB

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The latest UK jobs numbers show unemployment falling by 60,000 people to 1.69 million in the period October to December 2015.

While average weekly earnings rose by 2%. Commenting on the numbers, Mike Cherry, FSB Policy Director, said:

Unemployment is historically low demonstrating the ongoing strength of the UK labour market. However, the fact that average earnings growth has slowed is a sign that businesses are putting off pay rises in the face of a number of emerging headwinds.

Recent policy decisions have resulted in a growing number of new or unexpected costs for businesses, including higher than expected minimum wage increases, auto-enrolment deadlines and changes to how dividends are taxed. To meet these challenges employers are seeking ways to control costs and this may be a cause of slower than expected wage growth.

We urge the Chancellor to consider these challenges when drawing up his Budget in March. To boost productivity and raise wages, businesses need real progress on business rates, a firm commitment to simplification of the tax system and crucial investment in roads and broadband.

Commenting on the Consumer Price Index (CPI) which rose slightly to 0.3% in January, Mike Cherry, said:

FSB research shows that confidence among our members has cooled in recent months with some evidence of an emerging North-South divide in outlook. In order to support small firms in this low inflation environment, we urge the Bank of England to carefully consider the right time to raise interest rates. When the time comes to push rates up, the Bank should do so gradually so that businesses have time to adjust.