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Peer2Peer Finance News | December 13, 2017

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Small firms cutting back to cope with national minimum wage

Small firms cutting back to cope with national minimum wage
Suzie Neuwirth

ALMOST TWO thirds of small businesses have reported lower profits due to the national living wage (NLW), new research has shown.

A survey by the Federation of Small Businesses (FSB) highlighted ways that bosses have coped with the increase of the NLW to £7.50.

While 64 per cent of firms said they have made less profit, 39 per cent have increased prices and a further quarter of businesses have cancelled or scaled down their investment plans.

A fifth said they have reduced staff hours or hired fewer people.

Read more: Government urged to boost British Business Bank resources

The trade body is now urging the Low Pay Commission to consider whether the government’s 2020 NLW target of £8.75 should be delayed, and is calling for the NLW to increase to no more than £7.85 next year.

“Small employers have demonstrated their resilience in meeting the challenge set by the national living wage, with many cutting their margins, or even paying themselves less, to pay their staff more,” Mike Cherry, national chairman of the FSB, said.

“In sectors where margins are tight, small firms are resorting to more drastic measures to cope with the NLW.

“It’s vital that the NLW is set at a level that the economy can afford, without job losses or harming job creation.

“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.”

Read more: Five things SMEs can do to boost productivity

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