CBI chief Paul Drechsler sounds alarm over the National Living Wage

Jessica Morris
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Businesses are expected to suffer as a result of the "living wage" (Source: Getty)

The boss of one of Britain's biggest business bodies has warned over the unforeseen impact of the National Living Wage, amid growing concern from some of the companies that will be affected.

"I've talked to several chief executives and been surprised by the impact on their profits of the change," Paul Drechsler, chief executive of the CBI, told the Financial Times.

The living wage will be £7.20 an hour for those over 25 from April 2016, increasing to £9 an hour by 2020.

Drechsler added that the introduction of the Living Wage was the right thing to do "socially" however the impact on jobs would be bigger than initially estimated.

The Office for Budgetary Responsibility estimates that the Living wage will lead to 60,000 fewer jobs by 2020.

Companies are becoming increasingly vocal about the impact of the Living Wage, announced in chancellor George Osborne's summer budget, on their balance sheets.

Costa Coffee and Premier Inn parent group Whitbread today warned it would be forced to make "some selective price increases".

Former Sainsbury's chief executive Justin King has also warned that the Living Wage will "destroy jobs".

"You can't talk about productivity without recognising that one of the consequences of productivity is less people producing the same output," he told BBC Radio 4.

"Companies will invest in more productivity and as a consequence there will be less jobs."

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