UK Business Groups Warn Against Higher Minimum Wage Increase

UK business groups are calling on the government to keep next year's minimum wage increase in line with average earnings growth. The National Living Wage, which applies to workers aged 21 and over, stands at £12.71 an hour and is set to rise by around 3.7% next April. Business groups, including Make UK and the CBI, are urging ministers to limit the increase to this level, citing concerns that faster wage growth could prolong inflation and hit youth employment.

The Bank of England has expressed similar concerns, warning that stronger wage growth could prolong inflation after the energy price shock. Employers also point out that additional labour cost increases would be felt most sharply in sectors such as retail and hospitality, where businesses are being asked to hire more young people who are out of work.

The government says it is committed to a minimum wage policy that works for both businesses and workers, but has instructed the Low Pay Commission to prioritise the job prospects of younger workers when recommending next year's rates. The commission will deliver its final advice next month after taking in newer data on hours and earnings.