Small firms warn of fallout from living wage plans

FRESH concerns have been raised over the introduction of the national living wage after a “significant” number of small firms warned of a negative impact on their business from the move.

Market gains

A major survey of more than 1,200 smaller companies found that almost two out of five believe the £7.20 an hour rate from next year will take its toll on areas including job creation, pricing and investment.

The pay rate, for over-25s, comes into force next April, although it will be below the current voluntary living wage.

The Federation of Small Businesses (FSB) said today that its research showed that only one in 20 firms thought the UK government’s decision to introduce a new rate, which rises to £9 an hour by 2020, would have a positive impact on their business.

Wholesale and retail firms, as well as those in accommodation and food services, are most likely to be affected, the report noted. It comes after concerns were raised recently by a number of large businesses, including JD Wetherspoon, Next and Premier Inn-owner Whitbread, over the plans.

The FSB warned that although small business confidence and hiring intentions have been strong in recent years, there has been a “marked cooling” in confidence since the summer Budget.

FSB chairman John Allan said: “Over half of our members already pay their staff the voluntary living wage, but those that don’t are often operating in highly competitive sectors with very tight margins.

“Without improved productivity there is a real risk that higher enforced statutory wages will lead to fewer jobs being created, fewer hours for existing staff and unfortunately, in some cases job losses.”

Around 1,800 firms are now paying the living wage of £7.85 an hour, and £9.15 in London, set by the Living Wage Foundation.

Accredited employers commit to paying staff at least the UK and London rates, as well as sub-contractors working on their premises.

Recent analysis from the Resolution Foundation think tank found that around one in five employees in small businesses are set to get a pay rise as a result of the new national living wage, with total wage bills rising by 0.3 per cent. By 2020, almost three in ten workers are expected to get a pay rise.

A UK government spokesman said: “The new national living wage is an essential part of moving to a higher wage, lower tax, lower welfare society where work always pays and the majority of households are better off.

“The government also recognises that the national living wage needs to be affordable for businesses – that’s why we’ve set it at a level recommended by leading experts.”

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