Half of businesses plan to give staff pay rises of more than 2% in the next year, according to joint research by the British Chambers of Commerce (BCC) and Indeed.
In a survey of 1,020 businesses, 50% of businesses said they planned to increase staff pay in line with inflation or above it.
An additional 6% of firms expect to increase pay by more than 5%, while only 2% will decrease pay over the next 12 months.
While the rise is good news for employees, the BCC has warned that businesses will need to find a way to offset the cost of higher wages amid economic uncertainty and recruitment difficulties.
Jane Gratton, head of business environment and skills policy at the BCC, said:
"Growing and pervasive skills shortages are making it harder than ever for firms to fill job vacancies, so it is little surprise they are pulling out all the stops to keep hold of the ones they have.
"But the rising cumulative cost-burden of employment, together with business rates and other charges, increases pressure on firms to raise prices and automate.
"To avoid future job losses, the government must avoid any additional costs on business and help firms to boost productivity."
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