SMEs hit hard by National Living Wage, says FSB study

New data from the Federation of Small Businesses (FSB) has revealed today that the introduction of a new National Living Wage (NLW) has hindered profitability for at least half of Britain’s Small and Medium-Sized Enterprises (SMEs).

Three in five firms surveyed told the FSB that the introduction of a £7.20-an-hour minimum rate for over-25s in April had hit their business hard over the past few months.

The FSB’s study found that a further 35 per cent had been forced to rise prices and pass on their additional costs to clients and customers, whereas one in four had cut staff working hours.

Under recent projections, the NLW is forecast to rise at a rate of approximately £1.85 per hour over the next four years – meaning that the minimum pay for over-25s could sit at £9.05 by the year 2020.

Many small firms and micro-businesses operating on ‘the tightest margins’ fear that they may face closure, according to reports.

Mike Cherry, UK Chairman of the FSB, said: “The National Living Wage should be set at a level the economy can afford, based on economic and not political priorities.

“There is a risk that further rises, if too quick or too large, could lead to job cuts and even some companies on the tightest margins closing down.”

“Small employers have [already] stretched to meet the challenge, with many paying staff more by reducing operating margins,” he added.