Workforce issues, including pressure to increase wages, remain the biggest headache for business based in Bath and across the West of England, with many raising their prices to fund pay awards.
Combined with wider concerns over inflation, this has led to a slump in confidence – with levels now lower than they were immediately before the pandemic. 
The gloomy picture emerges from the latest Quarterly Economic Survey from Business West, the organisation behind Bath Chamber of Commerce.
It reveals that staff costs continue to be the leading source of price pressures for 68% of firms – up four percentage points since the same period last year.
The situation is even worse for manufacturing businesses, with 74% citing it as their main challenge.
Some 62% of respondents said they were worried about meeting the expectations of their staff in terms of pay and benefits increases, while workforce retention was an issue for 37% of businesses, along with 36% who reported that supporting staff morale and wellbeing was a key factor for their business.
Inflation was the second biggest concern (chosen by 60% of respondents) during the three months to June, the period covered by the survey.
Utility costs were the second biggest challenge (64%) behind those linked to staff and contractors.
However, there was a drop of five percentage points to 40% in the number of respondents who are planning to increase their prices in the next three months. 
Confidence in the UK economy over the next year fell marginally while the prospects for their own businesses experienced larger declines compared to the previous quarter.
Both are now lower than in the first quarter of 2020 – before the start of the Covid-19 pandemic.
Meanwhile domestic sales and orders slumped into strongly negative territory (minus 12 percentage points for both) following a small bounce last quarter. The international sales picture was even worse, with sales and orders both in strongly negative territory.
Almost 300 businesses from across the South West took part in the survey, among then was CT Engineering Group, a consultancy based on the Bristol And Bath Science Park.
Senior programme manager Chris Payne said: “Our industry is currently going through a period of high staff demand versus a low resource pool. This is driving up wages and affecting profit margins.”
Pete Hickerton, director of PH Sports, a sports coaching company based near Melksham, said: “We are looking at increases in pay for staff and overall costs will have to rise in accordance with this.”
Business West director of policy Matt Griffith, pictured above, said it was important the government supported more people back into work while creating the right conditions for employers to invest in skills to help close the gap and allow firms to grow.
“Businesses are facing persistent labour market tightness and, while it is positive to see that firms struggling to recruit has fallen this quarter compared to last, the percentage is almost 10 points up since the same period in 2021, during the depths of the pandemic,” he added.
“Fierce competition for skills, wage inflation and candidates’ expectations are leaving many businesses with jobs they can’t fill.
“There appears to be some way to go before the UK economy has a labour market that is delivering the skills and people to support the long-term economic growth we need.
“The silver lining is that wider inflationary pressures from shipping costs and supply chain pressures appear to be easing, meaning some hope that the financial squeeze faced elsewhere is letting up.”
