NEW research from the Federation of Small Businesses (FSB) shows the majority (64%) of small businesses impacted by the National Living Wage (NLW) have stretched to meet the latest rise by taking lower profits.
Two in five (39%) small businesses affected by the NLW have put up prices to cope with the latest increase to £7.50 per hour. A further quarter (24%) have cancelled or scaled down their investment plans, and a fifth have reduced staff hours (22%) or hired fewer workers (19%).
FSB’s research also suggests the faster rising NLW has not had the effect of increasing demand for younger workers. Less than four per cent of small businesses responded to the NLW increase by hiring more workers under the age of 25, who are on a lower rate.
In sectors where margins are tight, small firms are resorting to more drastic measures to cope with the NLW. Therefore it is vital that the NLW is set at a level that the economy can afford, without job losses or harming job creation.
Cost pressures on small businesses are building, and with most recent economic indicators underperforming, we are now facing the reality that the NLW target may need to be delayed beyond 2020.