More than two-thirds of small businesses in the UK say the introduction of the living wage will hit their ability to hire and grow.
The National Living Wage for over-25s will be introduced in April 2016 at £7.20 an hour, rising to £9 by 2020.
Britain’s SMEs believe the increased cost will make it harder to bring in new staff, according to research from job site Indeed.
“SMEs have less time and resources to devote to recruiting, making it increasingly difficult for them to compete with larger and more established companies for the best candidates,” said Bill Richards, managing director UK at Indeed.
“With staff costs rising, SMEs will need to find new efficiencies to maintain profit margins and ensure that they are still able to appeal to the most talented recruits.”