An ageing workforce is hitting productivity, employers warned Bank of England Agent for the West Midlands and Oxfordshire, Graeme Chaplin.
The comments came at a Manufacturing Business Network event hosted by the Midlands office of national audit, tax and advisory firm Crowe Clark Whitehill.
The network members added that there is less flexibility in the system and it is also contributing to an absence of younger skilled labour coming into the workplace.
“No longer having compulsory retirement is a huge issue,” cautioned Richard Wherton, partner at Crowe Clark Whitehill, who specialises in transaction support services, acting for clients and banks along with an entrepreneurial owner-managed businesses across a wide spread of sectors.
“The danger is an ageing workforce. An older worker, with more financial security, may be less motivated by cash incentives, and less inclined to take on extra hours or work overtime. This could potentially lead to a drop in productivity for some businesses.”
Attendees at the event argued that the lifting of pensionable age should be combined with a corresponding uplift in retirement age and not be left open ended at the employees’ choice.
A side effect is that some opportunistic skilled workers look to push up their pay.
Mr Chaplin heard that a further major concern was the cost of fuel and power, particularly gas and oil. There was unanimous agreement that a repeat of the recent scare that we might run out of gas would be catastrophic for businesses.
Mr Chaplin was also questioned on the Enterprise Finance Guarantee (EFG) scheme, whereby funding by banks is guaranteed by the Government up to 75 per cent of the loan value.
However, noted the members, the practicality of it is that a 100 per cent guarantee, including personal guarantees, is required by the banks anyway, and, if the company ends up defaulting on a loan, it will go to the individual security first before the EFG scheme. Why?
Meanwhile Mr Chaplin emphasised that the role of the Bank of England is to maintain low and stable price inflation while avoiding volatility in economic output and employment. As part of this, the Bank is supporting credit creation in the banking system via its Funding for Lending Scheme..
So far, the Funding for Lending Scheme has helped to improve the mortgage market. Extensions to the Scheme were recently announced aimed at further incentivizing the banks to lend to small and medium sized businesses.
Meanwhile CPI inflation is expected to increase to three per cent in the near term and then return to its two per cent target over the next two to three years.