FSB Blames Inflationary Pressures on National Living Wage Increase

Increase in UK national minimum wage might be behind inflationary rise

It might not just be a devaluation in the value of Sterling that is driving UK inflation higher.

The Federation of Small Businesses has said the recent rise in the living wage has heaped pressure on small business owners who have had to pay themselves less and raise prices.

The ONS has on Tuesday, August 15 announcement that the Consumer Prices Index (CPI) remains above the Government’s 2% target at 2.6% and the Retail Prices Index (RPI) has increased to 3.6%.

“Operating costs for small firms are now at their highest in four years. Increasing inflationary pressure has coincided with a bruising business rates revaluation and rising employment costs. Our entrepreneurs are paying themselves less and further increasing prices in an attempt to handle the strain. Four in ten small firms raised prices in response to April’s National Living Wage increase,” says Mike Cherry, National Chairman at the FSB.   

However, other factors are in play.

A hike in rail fares in line with today’s RPI will put further pressure on the consumer pocket, leaving all concerned with less to spend and invest.

Cherry has called on the Government should consider whether this inflationary measure is fit for purpose in the twenty-first century.

“The Chancellor needs to give very careful consideration to the upcoming Budget. With small firms feeling the squeeze, any increase in insurance premium tax, fuel duty or other stealth taxes will be bad for investment and job creation. We need to see all tax reliefs maintained, not least entrepreneurs’ relief, which represents an important incentive for our business owners,” says Cherry.