While business optimism has risen to an all-time high of 51% in this year’s second quarter growing fears over workforce skills could impact confidence, according to Grant Thornton’s International Business Report (IBR).
Of the 2,500 businesses across 36 economies surveyed by Grant Thornton International, 35% identify a lack of skilled workers as a constraint, the highest quarterly level ever.
Business optimism has increased in the last five consecutive quarters and optimism hit an all-time high in the USA of 81%, and the EU on a second year high of 50%. Grant Thornton global leader for tax services Francesca Lagerberg said that it would be easy to assume that the figures are good news from the record numbers, but the skilled worker shortage is a major warning.
“Despite companies telling us they plan to hire more staff, we’ve seen a steady increase in fears that a lack of skilled workers could hamper future growth. The overall outlook might look rosy, but the fight for talent is going to heat up and could cause wages and inflation to rise. How businesses respond will be key to keeping growth plans on track,” Lagerberg said.
Thirty six percent of global businesses expect to hire more staff in the next 12 months, another record high, yet only 20% plan to increase wages above inflation in the same time period. Germany is an exception, whose above inflation pay rises have leapt from 35% to 43%.
Lagerberg added: “Employment is increasing, profits are increasing, concerns about skilled workers are increasing, yet plans to increase pay in real terms remain stagnant. Something will eventually have to give and could cause greater inflation. In Germany, businesses appear to have realised that with tight labour markets, increasing pay is necessary to retain and recruit the skilled staff needed.”
Increasing wages is a short-term measure but longer-term, businesses will need to look at training programmes to boost skills among existing workers, advised Lagerberg.