Small firms expect to slow their hiring and raise prices as the newly announced national living wage is introduced.
A negative impact on business is expected by 38 per cent of small employers, according to survey data released today by the Federation of Small Businesses (FSB).
Half of firms said they would lift prices and 52 per cent said they would put of taking on new recruits.
The national living wage will start at £7.20 for over-25s in April and rise to £9 by 2020.
Firms in the wholesale and retail sector and those in accommodation and food services were most likely to say the national living wage will have a negative impact.
The FSB estimates that for a small retail business with six full time staff aged 25 or over and earning the current adult minimum wage, the national living wage will cost an extra £5,900 a year from April 2016.
“Over half of our members already pay their staff above the voluntary living wage, but those that don’t are often operating in highly competitive sectors with very tight margins,” said John Allan, FSB national chairman.
“In many of these industries, the only sustainable way to deliver real long term wage growth is to improve productivity. Without improved productivity there is a real risk that higher enforced statutory wages will lead to fewer jobs being created, fewer hours for existing staff and, unfortunately in some cases, to job losses.”