Minimum wage 'damaging small firms'


The Forum of Private Business (FPB) has warned that the minimum wage is having a damaging impact on an increasing number of small businesses across the UK.

A survey by the FPB has found that just under four out of 10 small firms believe the latest increase to the minimum wage, which rose £4.85 in October 2004 for those aged over 21, is having a bad or very bad effect.

Two-thirds also believe a further increase in 2005 to £5.35 - the level proposed by the TUC - would have a bad or very bad effect on their business.

The survey growing unease with the minimum wage compared with previous FPB research. In June 2001, an FPB survey of 2,000 members showed that just a quarter of firms thought an increase in the minimum wage would have a negative impact.

The FPB findings contradict research released last week by the magazine IRS Employment Review which found nearly a quarter of firms thought that the present level of £4.85 an hour was the appropriate rate, while another quarter thought it should be above £5.

But the FPB's Chief Executive Nick Goulding said the survey provided compelling evidence that an increasing number of small firms are turning against the minimum wage - which has risen by 34.7 per cent over five years; a figure well above earnings growth.

"The TUC and other organisations have called for persistent increases in the minimum wage without a second thought for its malign effect on small businesses," Goulding said.

"We are still measuring the effect of the last minimum wage hike on small firms and it is grossly irresponsible of the TUC to call for yet another massive increase.

"Small firms are not opposed to the minimum wage, in principle, but there is growing anger that it is increasing as a matter of course. The minimum wage is causing pain and a further increase could have devastating consequences on jobs and the competitiveness of small firms."

Mr Goulding said the minimum wage is having a heavy impact on high employment sectors such as retail, hotels, restaurants, cleaning, security, social care, hairdressing and textile manufacturing .

"Big business can absorb increases in the minimum wage as they employ relatively few staff on it," he added.

"It is actually small businesses that are hit hardest, especially those businesses in poorer and remote areas.

"Above all, it is an unwelcome additional pressure on businesses already being stung with a range of higher costs including increased employers' National Insurance contributions and rocketing levels of insurance premiums."