In many ways the private wealth sector is in a uniquely privileged position. Overall, the sector performed well during Covid-19, with a lot of firms reporting significant increases in profits. Now, its clients are largely sheltered from the economic fall out of the current cost of living crisis.
However, the sector’s employees might not be.
This week’s Spring Statement outlined the government’s response to the crisis. Although some relatively minor measures were announced, individuals are still going to be left to shoulder the vast majority of their bills and price increases.
The increases are steep and could have a significant impact on employees, particularly juniors. Employees may well be concerned about how they are going to afford their bills. Or, they may have to sacrifice holidays or other leisure activities they enjoy to meet the rising costs.
Various studies have shown that employees work best when they are happy and not stressed.
The University of Warwick found that happy employees are 12 percent more productive than those that are not happy.
Meanwhile, a study from the Financial Capability Strategy revealed that 55 percent of employees in the UK said that financial pressures affect their ability to work effectively. This study was conducted prior to the pandemic, so the figure now may be much higher.
The same study also showed that 70 percent of the UK work force spends a fifth of their time worrying about their finances. This equates to a total cost to the economy of around £120 billion annually.
Therefore, it is certainly possible to make a business case for supporting employees with the cost of living crisis, although of course this has a cost too.
There are also concerns that wage inflation will lead to the current high levels of inflation persisting for longer.
Indeed, Bank of England governor Andrew Bailey urged workers to “show restraint” when asking for pay rises to avoid this problem. However, given his annual salary is £575,000, these comments were not well received.
Firms do appear aware of the problems inflation is causing for employees and many are taking action. Some have already announced inflation-linked pay rises, while others are considering additional bonuses or one-off support measures to help their staff weather the immediate storm.
Either way, especially with the ongoing fight for talent, it seems firms that make the extra effort to support employees, may well find it easier to attract and retain top performers.
