FSB Says New National Living Wage will Harm Small Businesses

Cameron’s increased National Living Wage will cause UK small firms to hike up prices and reduce hiring rates

FSB Says New National Living Wage will Harm Small Businesses

Upcoming changes to the National Living Wage (NLW) have caused a wave of concern among small and medium businesses, with the Conservative party coming under fire, according to a new report by the Federation of Small Businesses (FSB).

Over a third (38%) of small business owners predict that the new NLW of £7.20 an hour for over 25 year-olds will negatively impact their business when it comes into effect next year, compared to the 6% of business owners who believe it will have a positive effect on business.

From April 2016, the government will introduce a new mandatory National Living Wage (NLW) for workers aged 25 and above, initially set at £7.20 – a rise of 50p relative to the current National Minimum Wage (NMW) rate

The FSB estimates that from April 2016 the annual small business labour cost will increase from approximately £127,700 to £133,600 due to the NLW, even after claiming the higher Employment Allowance (which is set to rise to £3,000 next year).

According to the FSB survey, which featured over 1,200 firms, in response to NLW small companies plan to slow hiring rates (52%), increase prices (50%), reduce staff hours (41%), cut staff numbers (31%), cancel or postpone planned investments (29%), and freeze or cut the wages of higher paid staff (26%).

Companies in wholesale and retail, accommodation and food services, and those based in Yorkshire, the West Midlands, Wales and the South West were found to be most sceptical about the introduction of the NLW.

John Allan, FSB National Chairman, commented:

“Over half of our members already pay their staff above the voluntary Living Wage, but those that don’t are often operating in highly competitive sectors with very tight margins. In many of these industries, the only sustainable way to deliver real long term wage growth is to improve productivity.

“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, to job losses.”

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