David Williams, md of Nottingham-based Butt Foods, described the increase as “disproportionate”, politically driven and higher than necessary. “I think the Low Pay Commission has been influenced by government more than it should have been, which I think is interesting, since there’s an election next year,” said Williams.
More than 1M workers on minimum wage in the UK are set to benefit from a 19p (3%) an hour rise in pay to £6.50 from this October. This represents the largest increase since 2008 and is the first time the minimum wage has risen above the Consumer Prices Index (CPI) in six years. The CPI stood at 1.6% in March when Cable announced the increase.
Cost jobs
“I have to compete with companies operating in parts of the EU where there is no minimum wage,” said Williams. “Such a large rise in minimum wage is going to cost jobs amongst UK SMEs competing against those countries.”
Coming on top of the additional costs on employers from the government’s new workplace pension scheme, the minimum wage rise would add to the burden on SMEs, which were already operating on extremely tight margins, he added. “If we can’t afford to keep producing in the UK, then we would have to move our bakery to Germany, but that would be a last resort,” Williams warned.
Raising the minimum wage by so much would also make it more difficult to recruit skilled workers, he said. “It’s already difficult to recruit them because of the skills shortage, but if we have less money to pay for those skills, then it’s going to be harder still to attract them.”
Inhibit sector growth
In the longer-term the increase in minimum wage, combined with increased employer pension contributions, would cost jobs in many of the UK’s SMEs and inhibit sector growth, he warned.
When compared with the the 10% increase floated by chancellor George Osborne at the start of the year, however, the government might argue that by making a lower 3% increase, it had listened to businesses’ concerns.