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Despite the economic upturn, two thirds of SMEs still say they are not ready to give their staff pay rises, a recent study has found.

The quarterly Viking Small Business Barometer found 62% of small business owners and managing directors believe the economy is still too ‘sluggish’ and as such are being careful with their profits.

46% acknowledge that business has improved this quarter, and 64% anticipate growth in the coming three months, yet 50% remain adamant that the reports and statistics are not an accurate reflection of the situation in their region.

The study found that, with the average annual British salary set at £27,000 and inflation remaining at 1.9%, employees of SMEs could risk being out of pocket by £500 by the end of the year.

Sophie Christopher at Viking said:

“Although we’re seeing signs of economic recovery, SME owners still remain level headed with their approach, opting to tread cautiously rather than be too eager. While they’re reluctant to issue pay rises, small business owners recognise that living costs are rising and welcome an increase in minimum wage. Managing Directors are starting to become more optimistic about their future and with many seeing growth in the pipeline, hopefully the current positive reports about the economy will become a true reflection of the state of their business.”

The report also revealed that 89% of SMEs surveyed do not predict a high turnover of staff in 2014, despite the country’s move away from recession. 26% also said they provide flexible working as an alternative to pay rises and just 17% are planning to recruit for new positions this year.

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