Manufacturers: ‘National Living Wage unaffordable’

02-Aug-2015 - Last updated on 03-Aug-2015 at 10:39 GMT

A £7.20 National Living Wage would be 'too much' for the food and drink industry to afford

Food and drink manufacturers in the UK won't be able to afford the £7.20 an hour National Living Wage (NLW) when it comes into force next year, according to a recent survey.

Chancellor George Osborne’s plans to implement the NLW in April 2016 could spell disaster for the sector, the results from an online poll of FoodManufacture.co.uk readers showed.

Almost half (48%) of those asked if the food and drink industry could afford the NLW said no.

More than a third (36%) of those asked said the sector could afford the NLW, while just 16% said they were unsure.

The current minimum wage is £6.50 an hour. From October this year it will rise to £6.70 and in April next year, Osborne’s plans to introduce the NLW would see it rise to £7.20 an hour.

Wreak havoc across the industry

Moody’s, the credit rating agency, warned that implementing the NLW could wreak havoc across the UK’s food and drink industry and would result in food price increases or job losses in the sector.

However, the sector was more likely to make redundancies as it was already operating at rock bottom prices, it added.

Greencore boss Patrick Coveney said in the company’s third quarter results that the wage rise would lead to inflationary pressures across the UK grocery supply chain.

Greggs, the north east food-to-go manufacturer and retailer, was yet to assess how the NLW would affect it, it said.

The firm already paid 9% above the national minimum wage, it said in its financial results, and shop staff received £7.11 an hour.

‘Ensure the future competitiveness of food’

Food and Drink Federation director general Ian Wright told FoodManufacture.co.uk: “It is important that the direct impact on the thousands of small- and medium-sized food businesses is minimised to ensure the future competitiveness of the food and drink manufacturing sector.

“The counterbalance of a reduction in corporation tax and National Insurance contributions will go some way in helping food and drink manufacturers manage this change,” he said.

However, the corporation tax decrease would not help the industry, according to one reader.

The reader, John Foster, commented: “The proposed corporation tax (CT) decrease is utter trickery. Companies pay CT on profits and get a refund when they make a loss.

“The wage increase will erase profits and will put many firms straight into loss making from where they will receive a lower rate of CT rebate.”