Small firms voice concerns over Living Wage rises

Uncertain economic conditions should delay the implementation of forthcoming rises to the National Living Wage, small businesses have claimed.

The Federation of Small Businesses has said the change – which will see the wage rise to £8.75 per hour by 2020 – may need to be reconsidered.

The call follows a raft of poor economic data, with the FSB stating that productivity, growth in gross domestic product and real incomes are all falling.

From this, the FSB has suggested that any increases to the wage should be limited to no more than £7.85 next year – a rise of 35p on the current rate.

FSB National Chairman Mike Cherry added: “It’s vital that the National Living Wage is set at a level that the economy can afford, without job losses or harming job creation.”

The FSB adds that small businesses are facing cost pressures and that it would be unfair to expect them to face up to more outlays at a time when the economy is underperforming.

Recommendations on the National Living Wage on whether higher pay rates will be affordable are due from the Low Pay Commission this autumn, with a final decision set to be announced in the Autumn Budget.

According to the FSB, the majority of small businesses already pay above the National Living Wage, but 43% have had to increase pay rates as a result.

Most of those reported lower profits, while 39% said they had raised their prices in order to cover staff payments, ultimately meaning that consumers lose out.

At the same time, 24% of firms had reduced their investment plans, 22% had scaled down the number of hours worked by their staff, and 19% simply cut their number of hires.

For businesses operating on tight margins, rises to wages can act to limit growth or may even lead to cash flow difficulties when other factors are also considered.

A number of alternative finance options exist to aid companies looking to refinance, while businesses should seek advice and guidance if they believe they are short of options – solutions may exist that were previously not thought about.

The latest calls from the FSB follow the latest Small Business Index, which revealed that operating costs are at their highest level for four years, leaving a number of firms teetering on the verge of insolvency.

By Phil Smith


By Phil Smith


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