HSBC has today outlined how businesses can combat the cost pressures of the national living wage - and the kind of companies that will be the winners and losers from the legislation.
The best way to offset the new costs is to find productivity growth, HSBC analysts said in a note, although "this would require a sharp turnaround from its recent dismal performance."
If the economy slows in 2017, this will temper the rate at which the national living wage rises, because it is linked to median hourly pay.
The effect of the legislation is, therefore, "blunted by Brexit", HSBC said, but it is still a problem for superstore retailers, which operate on low margins with a low-pay workforce.
"It is another example of cost inflation outpacing price inflation," HSBC said.
In addition, retailers that focus on gaining market share - which Aldi and Lidl have been focusing on - will win out as costs rise.
Women will also do well out of the living wage, because they make up a larger proportion of the low-paid workforce than men do, HSBC said.
Several retailers, such as M&S, have been cutting pay and jobs following the introduction of the living wage. A group of employees at Tesco recently announced that they would be taking the supermarket to court over the practice.
But HSBC said in its note that these actions where not strictly necessary.
"For the economy as a whole, the corporate share of income is currently quite high, suggesting firms can increase pay without large price rises or headcount reduction," the bank said.