The government has confirmed a significant rise in the National Living Wage, set to take effect from April 2026, but the move has been met with stark warnings from financial experts about potential negative consequences for the economy.
What Are The New Minimum Wage Rates?
From April next year, the hourly rate for workers aged 21 and over will increase by 4.1 per cent to £12.71. Younger workers will see even larger percentage rises. Those aged 18 to 20 will receive £10.85 per hour, an increase of 8.5 per cent. For apprentices and workers aged 16 to 17, the minimum wage will rise by 6 per cent to £8 per hour.
Chancellor Rachel Reeves stated the changes address the ongoing cost of living crisis. "I know the cost of living is still the number one issue for working people," she said, adding that the rises are intended to properly reward those on low incomes and benefit young people entering the workforce.
Business Leaders Sound The Alarm
Despite the government's positive framing, several finance directors have issued severe criticisms, labelling the policy short-sighted and damaging.
Justin Moy, Managing Director of EHF Mortgages in Chelmsford, warned the increase will fuel inflation. He pointed out that roles for young part-timers have already fallen as businesses grapple with previous wage and National Insurance rises. "Businesses are being told to pay up yet again, and this will just fuel inflation yet again," he cautioned.
Michelle Lawson, director of Fareham-based Lawson Financial, was more scathing, calling it "a ludicrous decision" that will "decimate the student, part time and youth job market". She argued that with businesses already under pressure, the enforced pay increases will force further constriction. "Absolutely crass naivety and short-sightedness," she stated, accusing the government of being "anti-business" and "anti-growth".
Broader Economic Concerns Raised
Riz Malik, director at R3 Wealth in Southend-on-Sea, questioned the timing, given a fragile labour market and flatlining economy. "Let’s make it more expensive to employ people? That makes no sense to me," he said. He suggested the policy could inadvertently accelerate investment in automation, stating, "If the government wants to drive businesses to invest in AI at the expense of their human labour force, this was the right move."
The overarching concern from critics is that the well-intentioned boost for low-paid workers may have severe unintended side effects. They fear it could stifle job creation for the young, place unsustainable burdens on small businesses already facing a tough economic climate, and contribute to persistent inflationary pressures, ultimately undermining the growth the government seeks to foster.
