Mark Mulholland

Labour shortages and price rises continue to threaten economic recovery, according to data compiled by SCDI, with a surge in vacancies in Scotland exerting upward pressure on wages and inflation forecast to reach 5% by the end of the year.

Two-thirds of SME manufacturers expect an impact in the coming three months and concerns about labour shortages are at their highest for over three decades.

Mark Mulholland, partner in Wylie & Bisset’s Business Advisory department, said that staff shortages are an issue confronting most sectors of the economy and advises employers to address it directly by identifying and securing key members of staff and rewarding them accordingly.

He said: “Such rewards may take the form of annual pay rises or one-off bonuses, depending on the nature and structure of the business.

“In addition to average pay rises of 2-3% across the board, in sectors where skills are in particular scarce supply, rises of 25-30% are not uncommon, with one-off bonuses on top of that becoming commonplace.”

Mr Mulholland says that, in addition to staff shortages, the shortage of supply of goods and services is the main economic issue confronting businesses this winter.

He added: “The reason for the shortage in supply of many goods and materials is global logistics – many shipping containers are in the western hemisphere when they should be in the eastern hemisphere and that issue takes time to address.

“And because of this shortage in supply, many projects are taking longer that anticipated, which means that many small businesses need to speak to their banks to access sufficient working capital to see them through these short-term, high inflationary supply issues because cash is king.”

In the face of a shortage of supply, Mr Mulholland advises SME owners to be prepared to raise their prices.

Mr Mulholland commented: “What we’re finding is that, in certain cases, customers are prepared to put up with significant prices increases for goods and materials provided that supply can be guaranteed.

“If business owners have goods in high demand but scarce supply, then they may be able to charge a premium for their product, especially in the construction industry, where some customers are willing to accept price increases in return for continuity of supply.”