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Firms fear impact of living wage says CBI survey

Although the survey found that there is evidence of wage growth for 2016 (with 16% of the respondents saying that they will give above-inflation pay rises to staff -compared to 12% in 2014 and 7% in 2013), it also indicates that companies are still dismayed regarding the two new policies announced by Osborne -i.e., the minimum wage increase and the apprenticeship levy.

Carolyn Fairbairn, the CBI’s director general, said the costs were “acting as a cumulative drag that could hamper growth”. Half of those in the service sector said they would have to put prices up to cope with the costs, 27% will employ fewer people and 18% will “make changes to” (read: “cut”) pay and perks. Of those employers who feel the national living wage will have an impact, 34% anticipate having to raise prices.

Neil Carberry, the CBI’s employment director, said businesses agreed with the overall aim of improving skills and raising the base level of pay.

British businesses were concerned about the effects of a living wage on economic growth, according to a business lobby group.

“The government must be careful not to sacrifice prosperity for political expediency by saddling businesses with costs that could harm investment, which is critical to increasing productivity”, Fairbairn said.

In response to the findings of the survey Ms Fairbairn said that “skills shortages remain a problem”, adding that “both the Government and businesses must contribute to building a higher skilled domestic workforce”.

“Most significantly, just under half, 46 per cent, of respondents reported a lack of skills is threatening to have a major impact on the UK’s labour market competitiveness”.

The survey showed a big increase in concern among employers about their ability to recruit migrant workers.

“We live in an era of significant labour market interventions… driven by Westminster”, Carberry said.

Yesterday, in an interview with The Sunday Times, she said that unless there were changes to the apprenticeship levy, it is “inevitable there will be significant job lossess” in some sectors.

In November George Osborne confirmed that, from April 2017, employers would have to pay 0.5 per cent of their pay roll costs towards the levy – offset by a £15,000 allowance meaning that most employers would not have to pay.

‘The right outcome of a levy must be an increase in training that is relevant to the business and the individual learner, not merely a tick-box process that delivers 3million training interventions and reduces the call on government funding, ‘ it said. The government hopes the levy will help it hit a target of 3m apprenticeship starts by 2020.

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