Government needs to tread carefully - and slowly - on National Living Wage, warns NHBF

When chancellor George Osborne delivers his Autumn Statement and Comprehensive Spending Review next week he must make it very clear he genuinely understands the real fears many small businesses have over the impact of the new National Living Wage, the NHBF has warned.

Ahead of the two announcements on 25 November, the Federation is calling on the chancellor to pledge that the effect of the living wage on businesses – and especially small businesses – will be closely monitored before any future rises are announced.

The introduction from April 2016 of a new £7.20-an-hour National Living Wage for employees aged 25 or over was the centrepiece of the chancellor’s summer Budget in July.  The government has already said it is keen to make the living wage £9 an hour by 2020.

But the NHBF’s research has argued there is deep concern already among many small salon owners about the effect of even the new £7.20 rate, let alone anything higher.

Salons have warned that, if they are unable to pass on the cost to customers, they will have little choice but to cut staff numbers or hours, cut their own profit margins, switch to chair renting (self-employment), or even look seriously at selling up.

NHBF president Paul Curry said: “The goal of the new National Living Wage to reward older, more experienced workers is a positive one. But Mr Osborne has to be careful that he doesn’t do irreparable damage to the high street.

“Hairdressing salons, barber shops and beauty salons are unusual in that they are small, relatively low turnover businesses yet with high staffing costs – so any increase in wage costs hits salons especially hard.

“Our members are genuinely worried how they’re going to accommodate the new National Living Wage.  It is coming on top of last month’s increase in the National Minimum Wage, which included a 20% rise for apprentices, and just at the time when salons are implementing pensions auto-enrolment which further increases employment costs. There is real fear the National Living Wage could be the tipping point for some salons.

NHBF chief executive Hilary Hall said

Next week we’d like to see the chancellor give small businesses a 12 to 18 month breathing space from next April to allow for a proper evaluation of what effect the National Living Wage is having on the ground and, from there, what is realistic and affordable in terms of future rises and timescales.