Business Leaders' Forum

National Living Wage will hit small food firms

By Rick Pendrous

- Last updated on GMT

NFU boss: 'The National Living Wage will have a huge impact'
NFU boss: 'The National Living Wage will have a huge impact'

Related tags Minimum wage

The National Living Wage (NLW) – which comes into force in April – will place extra costs on many small food and farming businesses, already struggling to cope with other government changes being introduced at the same time, warned industry bosses at last month’s Business Leaders’ Forum.

Meurig Raymond, president of the National Farmers Union, said: “The Living Wage is going to have a huge effect, particularly on the horticultural sector not just down at farm level, but right through the sector, from pack houses to people who are delivering into retail and retail as well.”

Given these extra costs, Raymond questioned whether the big retailers would continue to back British farming and buy products, such as soft fruit and vegetables. “There is no doubt, from a competitive point of view there will be countries in southern Europe that will be able to undercut our British horticulture industry quite dramatically,”​ he warned.

Wage bill to rise by £5M

Speaking to delegates at the Forum, sponsored by legal firm DWF, ALcontrol Laboratories and insurance firm RSA, Raymond cited a large horticulture company that expected its wage bill to rise by £1M next year and by £5M by 2019 because of these changes.

From April 1, workers aged 25 or over and not in the first year of an apprenticeship, will be legally entitled to at least £7.20 an hour, representing an extra 50p an hour above the current National Minimum Wage (NMW) for those aged 21 and over. The NMW will still apply for those aged 24 and under.

Raymond’s concerns were echoed by other delegates, such as those running small food and drink businesses. Some manufacturers might be able to offset rising cost by automating their operations, said the head of one small firm.

However, while many small businesses supported the idea behind introducing the NLW, he conceded it would “disproportionately affect small businesses”.

Squeezing small businesses

“What’s really squeezing us is the Living Wage combined with the government reducing capital allowances at the same time to smaller businesses; plus there’s the pensions introduction over the year; we’ve now got to start quarterly tax reporting; they are changing the dividend structures, and local government are withdrawing resources,”​ he added.

The NLW would also hit those food businesses that were already paying above the minimum wage to retain staff. This is because it would erode any differential in pay they were able to offer workers.

Elsewhere, Derek Ferrol, the boss of Glasgow-based recruitment agency EasyRecruitUK has urged food and drink businesses to rise to the NLW challenge. “In order to limit the impact of the NLW, they need to consider moving to a ‘flexible labour’ model,”​ he said.

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