'Lower rise' in living wage expected next year

Wallet with notes in it Image copyright PA

Weak pay growth in the wake of the UK's vote to leave the EU is set to reduce the increase to the National Living Wage by 10p, the Resolution Foundation forecasts.

The think tank now expects the rate to rise to £7.50 an hour next year.

That would still mean an annual pay rise of up to £600 for full-time staff.

The National Living Wage, which was introduced in April, currently stands at £7.20 per hour for workers aged 25 and over.

About 4.5 million workers are expected to benefit from the increase - with the amount dependent on how many hours they work.

Stephen Clarke, policy analyst at Resolution Foundation told the BBC's Today programme: "The National Living Wage relates to average earnings and because of Brexit, many forecasters, including the Bank of England, revised down their earnings growth; therefore the National Living Wage has also been revised down."

The Resolution Foundation now forecasts the rate - which is linked to the growth in pay of typical workers - to reach £8.60 by 2020, based on current forecasts.

Further details are expected as part of the Autumn Statement on 23 November.

Despite the fact that the increase is lower than expected, the report adds that the National Living Wage is still set to transform the country's low-pay, helping some 800,000 workers out of low pay by 2020.

Low-pay is defined as an employee earning two-thirds of the country's typical hourly pay.

A spokesperson for the Department for Business, Energy and Industrial Strategy said: "The government is committed to building an economy that works for all and the national living wage is doing just that, with more than one million workers already benefiting from a pay rise.

"The independent Low Pay Commission is chiefly responsible for making recommendations for national minimum wage rates."

'Drastic measures'

Research from insolvency firm Begbies Traynor has indicated that nearly 100,000 businesses are said to be experiencing "financial distress" since the higher wage came in.

Retailers, hotels, bars, restaurants, sports and health clubs are among those suffering the most.

Julie Palmer, a partner at Begbies Traynor said: "My concern is that many of these struggling businesses may now be forced to take more drastic measures to manage their growing cost base, such as further cuts to staff numbers, reducing bonuses or even passing on the increased costs to the end consumer."

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