Budget 2021: Business will struggle as living wage rises, trade body warns

26 October 2021, 09:21

EJ Ward

By EJ Ward

Mike Cherry, the chairman of the Federation of Small Businesses, told LBC he has reservations about the Budget.

The comments come as it looks set more than 5 million workers could receive a pay rise next year - after Chancellor Rishi Sunak confirmed he's lifting the public sector freeze.

It was also announced workers on the minimum wage will get a pay boost from April.

The Chancellor announced adults aged 23 and over will see the rate go from £8.91 to £9.50 per hour, but the FSB has hit out at the plans, warning it could have a tragic impact on small businesses.

Read more: Millions of public sector workers to benefit as pay freeze set to be axed

Mr Cherry told LBC's Nick Ferrari: "For the smallest employers they will struggle to maintain jobs they need because of the increase of the national living wage, and employees will have to face the increase of NI contributions next April so it is problems all around.

"As we look at consumers we should look at businesses and tradesmen, the cost of diesel and the cost of materials. That's alongside debts and coming out of the pandemic."

The 6.6% hike is twice the current consumer price inflation rate.

Read more: No need for Covid Plan B – we can have Christmas so long as we're careful, minister says

Mr Cherry added: "The smallest businesses will really struggle to keep people employed with the living wage going up higher than expected.

"The Government should increase the employment allowance to allow businesses to employ people on their books.

"We believe it will go a long way in supporting those businesses."

He said he would ask Paul Scully, minister for small business, where the support is "to keep people in the jobs they need".

He added: "Small businesses need that support coming out of the pandemic and we hope the Chancellor will announce that tomorrow."

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