Compulsory living wage strikes fear into licensees

George Osborne’s shock announcement in the Budget of a new compulsory living wage has left many licensees concerned about spiralling wage costs, with warnings that some pubs will struggle to survive.

From April next year, all businesses will have to pay a minimum of £7.20 per hour (50p more than the current minimum wage) to people aged over 25, rising to £9 by 2020. The living wage is de-fined as the level an individual needs to earn to cover the basic costs of living in Britain.

Claire Alexander, who runs freehold pubs the Ebrington Arms, in Chipping Campden, Gloucestershire, and the Killingworth Castle, in Wootton, Oxfordshire, said: “The Government is expecting small businesses to pay for the living wage without thinking about how they manage to do so. It will impact on pubs hugely and definitely lead us to offer fewer jobs.”

The Office for Budget Responsibility, an independent body that reports on the UK economy, estimated that the new living wage will see tens of thousands of people lose their jobs and four million fewer hours worked per week due to the added cost to employers.

A Greene King tenant based in Suffolk, who wished to remain anonymous, contacted the Publican’s Morning Advertiser stating he was particularly worried about the impact on tied pubs.

“It’s hard enough already without adding further costs. The tied model makes it hard to compete. Freehouses make greater profit so therefore paying their staff more is easier. I’d love to pay my staff more weekly, but it’s a struggle.”

However, Devon licensee Suzanne Abrey-Cameron, who runs Exeter’s the Prospect Inn and already pays her staff the living wage, said the Chancellor hadn’t gone far enough to make earnings fairer for low-paid workers.

She said: “What the Government has done is increase the minimum wage and just called it the living wage.

"The living wage is actually £7.85 per hour and is £9.15 in London. It should also cover every age bracket, which this policy doesn’t. I fear this is going to drive the older, more experienced staff out of the industry as people might well look to hire 18-year-olds because it’s cheaper.”

Kate Nicholls, chief executive of the Association of Licensed Multiple Retailers, said: “In effect, what we are facing is a 6% increase in wage costs at a time when inflation is around zero and there is no commensurate increase in demand as a result of people being paid more. This will have a significant impact on wage costs, which some businesses will struggle to cope with.”

She added that small businesses would have already “taken a hit” on increased costs before changes in employment allowance and corporation tax kick in, meaning it was likely that some pubs and bars would struggle to remain profitable.