More than a third of small firms are increasing prices to meet the cost of the new living wage, according to new research.
Almost 60% of businesses said they will absorb the cost from profits, while 35% said they have had to increase prices, 24% are reducing staff hours, 23% cutting investment and 16% recruiting fewer workers, found the Federation of Small Business’s (FSB) Q2 Small Business Index.
Nearly half (47%) of respondents said wages are the main contributor to the rising cost of doing business.
The FSB is urging the government to give the Low Pay Commission flexibility on how to meet its target of setting the living wage at 60% of median earnings by 2020.
The national living wage is currently set to rise by £1.85 per hour over the next four years, to £9.05 by 2020.
“Considering the uncertain economic climate, the Low Pay Commission must be given the opportunity to adapt the target in future years so that it can be met without job losses or harming job creation,” said Mike Cherry, national chairman at the FSB.
“The rate of the national living wage should be set at a level the economy can afford, based upon economic and not political priorities.”