Trade fears cutbacks as minimum wage tops £5

by Ewan Turney

Tony Blair has confirmed that the national minimum wage will break the £5 barrier for the first time, sparking fears that pubs may be forced to limit opening hours, raise prices or shed jobs.

At his monthly press conference, the Prime Minister announced that the Government would press ahead with plans to increase the minimum wage for adults from £4.85 to £5.05 per hour in October 2005 and to £5.35 per hour the following year ­ almost a 50% increase on its 1999 introduction level.

Federation of Licensed Victuallers Associations chief executive Tony Payne said he was disappointed with the news. "I think it would have been fairer to raise the level to £5 this year and then have subsequent rises in line with inflation," he said. "The trouble is a lot of tenants do not earn this rate themselves. It might be a case that they have to consider reducing opening hours when there is actually more pressure with the new laws to stay open longer."

However, Payne does support the rise in the youth rate for 18 to 21-year-olds and would liketo see it increased further. "I recommend to my members to pay over 18s the same level as adults. They do the same work so should be treated the same."

Forum of Private Business chief executive Nick Goulding said small businesses would be hit hardest by the increase. An FPB survey revealed that 64% of its members believed that a rise to £5.35 would have a bad or very bad effect on their business.

"We urge the Government and the Trade Unions to understand that the minimum wage is causing pain, and a further increase could have devastating consequences on jobs and the competitiveness of small firms,"he said. "It is an unwelcome additional pressure on businesses already being stung with a range of higher costs in-cluding increased employers' National Insurance contributions and rocketing levels of insurance premiums."

Graham Rowson, Punch lessee at the Plungington Tavern in Preston, Lancashire, said the rise could have a "disastrous" effect for some pubs.

He said: "The big chains will be fine but small operators like myself will have to look very carefully at overheads. The most probable response would be to put up the price of a pint, as costs have to be covered."

However, the move is not without support in the trade. Richard Slade, licensee at the Magnesia Bank in North Shields believes the increase is long overdue. "If we want bar staff to have certain levels of skill and be professional, we need to pay them accordingly," he said.

"I pay above the minimum wage and it usually pays dividends. You get more commitment and a better effort."