Chancellor George Osborne’s announcement to raise the minimum wage from £6.50 an hour to a £7.20 an hour National Living Wage would result in food and drink price increases or job losses in the sector, Moody’s said.
It would most likely be the latter, since manufacturers and retailers were already operating at rock bottom, said Sven Reinke, an analyst at Moody’s. If the sector was in a position to raise prices, it would have been done by now, Reinke added.
Food and drink firms would have no option but to make big changes to their businesses in response to the National Living Wage, which was announced in Osborne’s post-election budget and due to come into force next spring.
The rise would lead to inflationary pressures across the UK grocery supply chain according to Greencore boss Patrick Coveney in the company’s third quarter results.
Assess the impact of a further 9p
Minimum pay:
- £6.50: current minimum wage
- £6.70: minimum wage from October
- £7.20: National Living Wage from April 2016
The north east food-to-go manufacturer and retailer Greggs announced in its results yesterday (July 29) that it would have to assess the impact of the rise on its business.
Greggs also said that it paid 9% above the national minimum wage and most shop staff received £7.11 an hour.
Food and Drink Federation (FDF) director general Ian Wright told FoodManufacture.co.uk the organisation supported the rise in principle, but he had some concerns.
“It is important that the direct impact on the thousands of small- and medium-sized food businesses is minimised to ensure the future competitiveness of the food and drink manufacturing sector,” Wright said.
“The counterbalance of a reduction in corporation tax and National Insurance contributions will go some way in helping food and drink manufacturers to manage this change.”
However, firms that had not yet adopted the current minimum wage faced criticism from the government under its name and shame scheme, fronted by the business minister Nick Boles.
Today (July 30), 75 employers, including several foodservice operators, had been named and shamed for not paying their employees the National Minimum Wage. In total, their employees were owed £153,000.
‘Entitled to the National Minimum Wage’
Boles said: “We are determined that everyone who is entitled to the National Minimum Wage receives it.
“When the National Living Wage is introduced next April, we will enforce [it] robustly,” he added. “This means that the hard-working people of the UK will get the pay rise they deserve.”
The total number of companies named and shamed under Boles’s scheme, which was introduced in October 2013, stood at 285. Between them, the employers owed £788,000 in wages and £325,000 in penalties.
Meanwhile, some food industry leaders have claimed minimum wage rises would result in more food and drink manufacturers moving their operations overseas where labour was cheaper.
Md of Nottingham-based Butt Foods David Williams described last year’s minimum wage rise to £6.50 an hour as “disproportionate” and said it would make it harder for companies to be competitive.
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