Living Wage changes will cause small firms to slow hiring and increase prices

New research from the FSB says over a third of UK small businesses expect the rising National Living Wage to have a negative impact on business

Small businesses across the UK are to slow job creation and hike prices up when the new National Living Wage for over 25’s is introduced next year, research from the Federation of Small Business (FSB) has suggested.

The FSB’s survey of small employers found that over a third (38%) expect the Living Wage of £7.20 an hour, which will come into effect from April 2016, will have a negative impact on business.

Just 6% of small firms believe the policy will have a positive impact on their business with small employers in wholesale, retail, accommodation and food services, most sceptical about the higher wage level.

54% of small firms also believe that the projected rise in the National Living Wage to at least £9 an hour by 2020 will have a negative impact.

In response to the National Living Wage, 52% of small business said they would put off hiring new staff while 50% said they will raise prices.

Other steps businesses plan to take to manage the new Living Wage include cutting staff hours, reducing staff numbers, cancelling or postponing planned investments and freezing or cutting the wages of higher paid staff.

John Allan, FSB national chairman, said:

“The UK economy has been performing well, but we should not allow this to make us complacent. Businesses worked hard to weather the financial crisis, keeping on staff despite pressure to cut headcounts. Now times are better we know members are beginning to raise wages and take on new staff.

“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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