World events, economy and business update March 2022
Posted on 8th March 2022 at 11:51
Of course, the eyes of the world – and many millions of pounds in humanitarian aid – are on the Russian conflict right now.
But what happens abroad has both direct and indirect impact on business in the UK and in our region, as the ripples of the conflict nearly 2000 miles away are felt closer to home.
Four key areas to consider are:
Rising commodity prices. Russia and more widely Eastern Europe are vital to the oil and steel sectors, and sanctions will further impact commodity prices as supply is restricted. This will have especially for those in the construction sector and, more vitally for our region, the wider supply chain who will already be seeing spiralling costs.
Rising Inflation, including energy prices increases and the impact on household income. The Bank of England forecast is for inflation to hit 6% in Spring 2022, with some analysts predicting even higher rates of 7-8%. Consumer confidence will wobble, hitting discretionary spending, and sectors in retail, hospitality, and leisure.
Wage pressures, driven by inflation and the rise in the Living Wage to £9.50 per hour (over 22 rates, from April 2022).
In real terms, pay rises are not keeping up with inflation. Already stretched employees will also see their National Insurance contributions tick up from 12% to 13.25%, while employers’ contribution will jump from 13.8% to 15.05%.from April 2022.
Wage pressures are resulting in pay increases of 2%+ across the board, as well as increased costs from hike in employer NI. For many, this will likely impact on margins and the available investment for growth and more cautious appetite to risk.
Wage pressures are also likely to effect employee retention, with previously loyal employees weighing up loyalty against the reality of the money they receive each month, particularly in lower income jobs. We will also see more requests for working from home, particularly with the increase in fuel and petrol costs as employees tighten their belts.
Volatility and uncertainty. In volatile times, as we have already learnt through the pandemic, employees look for reassurance, and clear communication. Many will seek that support and reassurance at work and from their immediate line managers. On the other hand, this can counter the effect of wage pressures, and encourage employees to stay where they are.
We believe HR professionals have a vital role in supporting organisations to survive and thrive. Staying responsive, agile, and taking a proactive and pragmatic approach is key.
Practical steps from a HR perspective, include:
tighten up on processes to ensure a solid framework is in place;
consider discretionary bonuses rather than contractual pay rises;
consider hiring carefully, making sure a robust process is followed for investment in new roles;
ensure line managers with the day-to-day pressures of supporting, guiding and reassuring employees.
restructuring to future-proof your business if necessary.
Robust, strategic and commercially focussed HR support is vital to organisations looking to understand and weather current events. Contact us today for a confidential discussion via firstname.lastname@example.org
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