National Living Wage may negatively impact independent retailers

The Chancellor used his first Conservative Budget to cut benefits for low-paid employees whilst introducing a National Living Wage which will force businesses to pay them more. However, a number of retail analysts have warned that this new wage may have a "devastating impact" on independent retailers and may lead to price increases for consumers.

Industry experts warned that that under the new national living wage, which will see workers 25 years old and older hourly minimum rates increase to 7.20 pounds an hour in 2016 and to 9 pounds by 2020, the UK retail sector would be forced to reduce jobs, cut employees working hours and transfer additional costs to consumers. The increase in basic pay from the current minimum of 6.50 pounds is also likely to lead to cuts in annual bonuses, employee discount and pension payments as retailer face increasing pressure to keep costs down from consumers.

The British Retail Consortium, which represents the majority of the UK's biggest retailers, revealed that the median wages that its members paid currently stands at 7.30 pound an hour. BRC's Director General Helen Dickinson commented: "The retail industry is not a minimum wage employer...retailers will look closely at the new proposals and assess the impact."

Other retailers are convinced the wage will have a negative on their businesses. James Lowman, Chief Executive of the Association of Convenience Stores which represents thousands of small independent convenience outlets said to the Guardian: "The introduction of a compulsory living wage will have a devastating impact on thousands of convenience stores ... to introduce this undermines the independent Low Pay Commission and is a reckless way to impose a massive burden on small businesses."

Joseph Robinson, Conlumino research director added: "What the introduction of the National Living Wage does is to partially shift the financial cost of supplementing the wages of low paid workers away from government and towards businesses. Retailers will be particularly impacted, given the higher than average proportion of retailers’ workforces being paid the minimum wage. With UK retailers continuing to encounter unspectacular consumer demand and the unprofitable shift of consumer spend towards a wider array of channels, this extra financial burden will be unwelcome for some."

"The introduction of the National Living wage will lead to some hard decisions on costs for retailers. With the need, now more than ever, to provide a strong in store consumer experience amid the relentless growth of online, retailers will have to invest in high quality employees," he concluded.