According to Plimsoll, profit margins are at a record low with 21% of the industry already making losses. As a result, it says companies will not be able to afford the average salary rise from GB pound 22,775 to GB pound 23,875 next year.
In fact, Plimsoll says, the loss-making companies would be foolhardy if they took on any increase in salary costs at all.
The key issue for 38% of the industry is that they seem to be losing the productivity race because the amount of sales these companies generate per employee is GB pound 37,175. While the most productive companies generate almost three times this figure at GB pound 91,982 or around 45% of sales on salaries, for the unproductive, this figure rises to nearly 35% of sales.
Plimsoll’s analysis also places 44% of the 356 companies in financial danger. This situation means these companies have severe financial constraints making extra costs simply unsustainable.
David Pattison, senior analyst at Plimsoll Publishing said: “The productivity race has started. In the USA, companies have got more productive by getting more sales and profit out of their existing employees simply to remain competitive. In the UK, companies must aim for at least GB pound 78,000 per person to even get in the race.”
