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Wage increases take toll on small businesses

Four in ten small businesses are being forced to raise prices as a result of the necessity of paying higher wages, a report from employers’ group The Federation of Small Businesses (FSB) has found. 

The report also revealed that businesses were also cutting profits and delaying investment in a bid to absorb “inflation beating wage increases”.

The survey of more than 1,000 business owners found that the living wage increase in April 2019, when the National Living Wage rose to at least £8.21 an hour, had led to seven out of 10 small businesses cutting their profitability. One in three delayed investment and one in four reduced the number of hours worked by staff.

National chairman of the FSB Mike Cherry commented: “We’re now seeing more small business owners than ever saying that living wage increases are impacting the bottom line. Their first instinct is usually to take the hit personally, paying themselves less rather than cutting staff.”

“Policymakers of all stripes need to recognise that higher minimum wage rates are not a silver bullet. Ending poverty means taking action on various fronts, not simply burdening smaller businesses with more costs.”

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