The Federation of Small Businesses (FSB) has claimed that forthcoming rises to the National Living Wage should be delayed because of uncertain growth in the economy.
The move is seen as a “softening up exercise” to allow Chancellor Philip Hammond to renege on uprating promises in his next Budget, according to insiders.
The wage is currently scheduled to rise to £8.75 an hour by 2020 but the body which represents small firms said that target should be reconsidered, following a string of poor economic data.
In a blow to Tory fiscal claims, the FSB said real incomes, productivity and GDP growth were all falling, with only employment levels improving, as a result the wage should rise from £7.50 an hour to no more than £7.85 next year.
“It’s vital that the NLW is set at a level that the economy can afford, without job losses or harming job creation,” said Mike Cherry, the FSB’s national chairman. “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.”
The Low Pay Commission is due to make its recommendations to the government on the National Living Wage, but the FSB’s latest research suggests that most small businesses are already paying their staff more than the NLW, and 39% have increased their prices to make the pay rises affordable.