National Minimum Wage increase 'out of step with reality'

Government has today approved the increase for the adult minimum wage, recommended by the Low Pay Commission.

The British Retail Consortium described the increase as a “substantial rise which adds to the pressure on retailers as they try to grow their businesses and create jobs”.

The changes, which come into effect in October, also include an increase in the youth minimum wage, for 18 to 20-year olds, which rises by 6p to £4.98 an hour.

“Combined with slowing sales, poor consumer confidence and rising costs it will be a further obstacle to the retail sector as it tries to play its role in the country’s economic recovery,” said the BRC.

The BRC said it supports the principle of the minimum wage as a “basic floor for decent pay” but it needs to “reflect economic realities”.

It also said that just six months notice makes it difficult for retailers to budget for.

BRC director general Stephen Robertson said: “At a time when the priority should be getting more people into work, any increase in staff costs is an extra hurdle. This rise in the National Minimum Wage is at the very top end of what retailers could be expected to live with.

“Employers have just been hit by an increase in National Insurance. Business rates have soared and retailers are still absorbing much of the increase in VAT. This increase in the minimum wage is yet another challenge to retailers when trading is already difficult on the high street.

“A third of retail staff are under 25. Young people are facing some of the biggest challenges on the jobs market at the moment, and this increase makes it harder for retailers to expand and create the jobs needed. 

“In the current climate it is the private sector which is driving the economic growth that will provide the jobs and tax revenues of the future. The minimum wage must reflect the economic realities businesses are dealing with. Today’s announcement is out of step with reality.”

Business secretary Vince Cable said: “More than 890,000 of Britain’s lowest-paid workers will gain from these changes. They are appropriate, reflecting the current economic uncertainty while at the same time protecting the UK’s lowest-paid workers.”

David Norgrove, chairman of the Low Pay Commision, said: “We believe we have struck the right balance between the needs of low-paid workers and the challenges faced by businesses.”