Forecourt operators are warning that next April’s increase in minimum pay for over-21s to £12.21 an hour could mean staff cutbacks and increased customer prices, depending on what else today’s Budget has in store.
Yesterday Chancellor Rachel Reeves announced that businesses will have to pay staff a 6.7% increase on the existing £11.44 National Living Wage rate – representing an annual £1,400 for an eligible full-time worker.
The National Minimum Wage for 18- to 20-year-olds will also rise from £8.60 to £10 an hour – the largest increase in the rate on record. This £1.40 increase will mean that eligible full-time younger workers will have a pay boost of £2,500 next year.
This marks the first step towards aligning the National Minimum Wage with the National Living Wage to create a single adult wage rate, which would take place over time.
The move aligns with the Chancellor Rachel Reeves’ commitment that working people will not face higher taxes in their payslips.
She said: “This government promised a genuine living wage for working people. This pay boost for millions of workers is a significant step towards delivering on that promise.”
It remains to be seen if the Chancelllor has listened to calls from the industry for help on business rates, and a reduction in employers’ National Insurance contributions.
Patrick Sewell, managing director of Sewell On the Go, says that the impact of the increased wages will depend on the wider Budget package.
“While it’s a slight reduction in percentage terms over recent years, it’s still a substantial hike. However, it will be the compounding of measures announced by the Chancellor that will hit businesses hard,” he says.
David Charman, managing director of Parkfoot Garage in West Malling, Kent, says: “It’s another burden on our businesses that will have the effect of discouraging future employment. It will also have to be factored into our budgets, and inevitably margins and prices will have to rise to compensate.”
Oliver Blake, managing director of Oasis Garage, in Long Riston, Hull says: “All our staff earn more than the National Living Wage, which means in order to keep their pay in line with wage inflation we will have to increase pay yet again.
“The only outcome I see coming from this is higher prices for the end consumer to cover the higher internal costs of our business.”
Guy White, managing director at Laurels Service Station in Horncastle, Lincolnshire agrees and warns that higher paid staff including managers and supervisors, will expect a similar pay increase: “It will have a massive effect on fuel, convenience, the hospitality sector, and in that I include Subway, Starbucks, etc,” he says.
ACS chief executive James Lowman adds: “Our members are grappling with how to afford this inflation-busting increase in wage costs. The market remains tough, with many retailers reporting flat or declining sales while expenses like banking charges, credit card processing fees and energy bills are eating away at their profitability.
“More than ever, we need help from the Chancellor in the Budget. Without sustained and enhanced help on business rates, a reduction in National Insurance contributions, and effective incentives to drive investment, our sector faces a challenging future. For some communities, this could mean the viability of their local shop is put at risk.”
The PRA agrees: ”While we fully support fair pay, we urge the government to implement balanced policies that take into account the broader economic picture. It is essential that measures to increase wages go hand-in-hand with efforts to keep operational costs manageable for businesses, enabling retailers to keep fuel prices affordable for consumers,” says its executive director Gordon Balmer.
We will be giving a full report on today’s Budget when it is announced later today at forecourttrader.co.uk
