THE minimum wage and living wage were increased on the eve of the Budget, with experts warning it’s “another slap in the face for small businesses”.
The government has announced that the minimum wage will increase by 4.1% from April, to £12.77, while people aged between 18 and 20 will get an 8.5% rise to £10.85.
The living wage will increase to £12.71 per hour, Chancellor Rachel Reeves has also announced.
A day before she delivers her much anticipated Autumn Budget, the Chancellor said the government has accepted the latest recommendations of the Low Pay Commission to increase the rates from April 2026.
The minimum wage for 16 to 17-year-olds and those on apprenticeships will also increase to £8 per hour, a 6% rise.
Slap in the face for SMEs
Kate Allen, Owner at Kingsbridge-based Finest Stays, said small businesses will struggle to take the hit.
She added: “This is yet another slap in the face for SMEs (Small to Medium-sized Enterprises). We’re still reeling from the National Insurance hike, and now the government expects small businesses to absorb another costly, ill-judged policy.
“Raising the minimum and living wage is completely detached from the reality on the ground, where finances are stretched to breaking point and hiring is already frozen.
“What makes it even more insulting is the timing. Dropping this at 6pm the night before the Budget feels strategic; a last-minute attempt to soften the blow of what’s likely to be yet another disappointing set of announcements. It reads like political damage control, not policymaking.
“It’s infuriating how consistently SMEs are treated as an afterthought. We’re the backbone of the UK economy, yet we get all the burden and none of the support. There is zero incentive left to take on the risk and pressure of running a business when every new policy feels like another kick in the teeth.”
Move makes zero sense
Riz Malik, Director at Southend-on-Sea-based R3 Wealth, said business owners are shocked at the news.
He continued: “The economy is flatlining and the labour market is fragile, so let’s make it more expensive to employ people? That makes no sense to me, and I am sure it doesn’t to other business owners.
“If the government wants to drive businesses to invest in AI at the expense of their human labour force, this was the right move.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, claimed hikes to the living wage and minimum wage will fuel inflation.
He added: “This is great for the teenagers and those already on minimum wage, but the number of roles for the young part-timers has significantly fallen away, as businesses wrestle with both wage and NI increases over the past two years, against an uncertain background of retail sales and a slowing economy.
“The saving grace is that many of this population still live with parents and family, and will do for some time, looking at the latest first-time buyer data. Businesses are being told to pay up yet again, and this will just fuel inflation yet again…”
Crass naivety and short-sightedness
Michelle Lawson, Director at Fareham-based Lawson Financial, was scathing of the government’s decision.
She continued: “This is a ludicrous decision that will now decimate the student, part-time and youth job market further as the pay increases have to come from somewhere. Businesses are nailed to the floor and no doubt will be even more after they are ravaged in the Budget.
“Add to this the upcoming employment bill and it is a recipe for disaster. For economic growth, businesses need to expand and not constrict.
“Absolutely crass naivety and short-sightedness from this haphazard anti-business, anti-entrepreneur, anti-growth government who are doing their very best to destroy the UK.”
Businesses will automate faster
Colette Mason, Author & AI Consultant at London-based Clever Clogs AI, said rising costs will push businesses towards AI.
She added: “Another living wage and minimum wage hike that feels like punishment for daring to run a business. It’s been one financial mugging after another, and this 4.1% rise is just the latest in a long line of moves that treat small businesses like bottomless piggy banks.
“It seems small businesses can’t pass GO without collecting another tax bill. They simply can’t absorb 4.1% wage rises while also dealing with increased NI, pension contributions, and every other stealth cost that’s crept up since 2021.
“The 8.5% rise for 18-20s? That’s not youth opportunity, that’s making young workers more expensive to hire when they need entry-level experience most.
“When businesses can’t afford humans, they’ll automate faster, not because AI’s suddenly past the ‘slop’ stage, but because the maths forces their hands.
“You can’t tax your way to prosperity. You can’t regulate your way to innovation. And you can’t build a thriving economy treating job creators like the enemy.”
Photo by Eyekeeper Eyekeeper on Unsplash
