Minimum wage hike expected to hit trade hard

New warnings that the rate of the minimum wage will need to slow to avoid closures in the pub trade have been made in the week of the latest rise.

On October 1 the wage for workers aged 22 and over will rise to £5.35 from £5.05 an hour. The 'development rate' for workers aged 18 to 21 will rise from £4.25 to £4.45 an hour, while those older than school leaving age and younger than 18 will receive at least £3.30 an hour.

The Association of Licensed Multiple Retailers (ALMR) and the Confederation of British Industry (CBI) have warned that further increases could spell disaster for licensees in submissions to a Low Pay Commission review of the wage.

Half of all pubs have cut staff as a result of the pay rise, according to an ALMR survey of 21 managed chains, including single-site operators. Nine out of 10 said they had had to increase prices, while 84 per cent said that they had reduced their profits.

Nick Bish, chief executive of the ALMR, said: "Our survey shows the wage is now having a very real impact on consumer prices, business profitability and investment decisions. That is bad news for everyone, including staff."

Licensee Jacqui Kilroy said she was forced to cut staff at her pub, the Merry Monk in Leeds. "We've had to put our staff down to part-time because it's just too expensive to have full-time staff now," she said. "We're not a mega busy pub, and it's really hitting our business hard."

The CBI said that small firms in many sectors - including the pub trade - were struggling to meet the demands of the recently increased minimum wage.

The ALMR survey results broken down

• Gross employment costs have increased dramatically in the two years since the wage was last reviewed - up from a fifth to a quarter of total turnover.
• As a result 90 per cent said they have had to increase prices. 84 per cent said that they had reduced their profits.
• A larger proportion of bar staff are earning at or just above the NMW and there is now a clear trend for the NMW to represent the average wage rate for the sector.