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Minimum wage hike ‘could threaten jobs’

Retailers and business groups are growing increasingly concerned about the strain an above-inflation rise in the national minimum wage could place on employers, as the Low Pay Commission prepares to make its recommendation for the 2015 rate.

Last week media reports emerged claiming the commission, which comprises business and union representatives and academics, was split over whether to up the rate by 50p to £7 per hour. This was later refuted to Drapers by commissioner Bob Elliott, a professor at the University of Aberdeen.

Elliott refused to be drawn on the likelihood of a 50p rise, but pointed out there has never been a year in which the minimum wage has not been increased.

The commission is due to submit its recommendation to the government by the end of February. Ministers are expected to decide the new rate before the general election in May, to come into force in October.

Last year, Chancellor George Osborne informally backed an increase to £7 per hour by October 2015. This would be the second consecutive above-inflation rate under the coalition government after it accepted the Low Pay Commission’s recommendation of a 19p rise from £6.31 to £6.50 in 2014.

Labour has said it would increase the rate to £8 per hour by 2020, while the biggest hike would come from the Green Party, which is proposing to raise it to £10 per hour over the next five years. The Liberal Democrats and Ukip have not given specific amounts.

Independent retailers Drapers spoke to this week were in strong support of improving staff pay, but only if it is balanced out by reducing other costs.

Frances Bishop, co-founder of kidswear store Chunk (which is rebranding as Pud), employs eight staff across two stores in Nottingham and Doncaster on £7 an hour.

She said: “For smaller stores the effect could be damaging when added on top of business rates and the general increase in the cost of running a business. If the government will provide support in other areas such as these then I’m happy with it.

Otherwise, there’s a risk the cost will get passed on [to customers].”

Blair Daniel, manager and buyer of Concept Clothing in Aberdeen, employs four part-time staff at £6.50 an hour. He said a rise may force retailers to look for alternative brands from which they can get a higher mark-up to balance the books.

He added: “The knock-on effect would be hours cut, maybe a Saturday position lost. Everyone would have to work harder to secure their jobs.”

Michael Weedon, deputy chief executive officer of the British Independent Retailers Association, said any rise above the earning growth of businesses could threaten jobs. It has recommended a rise of no more than 1%.

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