Labour Chancellor Rachel Reeves is expected to announce a 6% increase in the national minimum wage during tomorrow’s Autumn Statement.
It will bring the current rate of £11.44 per hour up to £12.13 per hour.
While great news for low-paid workers, there are concerns that the burden will be felt in the hospitality and retail sectors, which are heavily reliant on minimum-wage workers.
These sectors have been pleading with Reeves for business rates relief, although there have been no indications that she will address these concerns.
In addition, there is the possibility that Reeves will implement and National Insurance Contribution (NIC) charge on employer pension contributions.
Berenberg analysts highlighted that the anticipated addition of NICs to employer pension contributions largely just reverses previous employer social contribution cuts by the previous government.
In actuality, “the tax burden on UK employers and workers will remain low by international standards”, said Berenberg. “Unlike in Germany and France, where higher labour costs are seen as important reasons for economic malaise, other factors matter more for the UK.”
However, a sizeable increase in the minimum wage “will add to cost pressures in sectors that rely on low-paid labour such as hospitality and retail”.
Analysts added: “As we expect domestic demand to strengthen in 2025, those costs are likely to be passed on to customers in the form of higher prices, adding to inflation.”