Businesses face additional hit as authorities pay physique forecasts ANOTHER rise within the minimal wage

The minimum wage is expected to rise again next year, adding to the burden on employers already struggling with higher labour costs.

The Government’s pay body has said the national minimum wage will need to rise by around 3.7 per cent to keep up with average earnings by next year.

It will mean workers will earn £13.18 an hour, up from the new wage of £12.71, which comes into effect from today for those aged 21 and over.

Businesses are warning that another inflation-busting raise is likely to affect small businesses without making other changes to employment costs.

Employers are already struggling with the burden of higher costs, with the hospitality and retail sectors, which rely on younger workers, warning that it will cost them a collective £3.3billion over the next 12 months.

Trade body UK Hospitality today warned that the increase to minimum wage and business rates will ’cause job losses and hit business viability.’

Another raise: The Government’s pay body forecasts another inflation-busting increase in the minimum wage in 2027

The Low Pay Commission, which advises the government on the minimum rate, said the 2027 forecast was provisional and could rise to between £13.02 and £13.34 depending on average earnings growth.

It represents a 2.4 to 5 per cent increase over the current minimum wage, which rose 4.1 per cent today.

The minimum wage has risen by around 50 per cent over the last six years, with the rate for workers aged 18-20 increasing even more sharply – from £6.45 to £10.85.

Businesses say that it has contributed to a huge increase in youth unemployment, which reached its highest rate in a decade at the end of 2025.

The Low Pay Commission said it was ‘alert to concerns’ about youth unemployment figures but disputed that the higher rate was to blame.

Its analysis showed that the biggest drops in employment of 18 to 20 year olds in the two years to April 2025 were in areas where workers were already paid above the minimum wage.

The prospect of another raise to labour costs is likely to be met with fury from businesses that are barely able to keep their head above water currently.

Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB) said: ‘Labour costs have risen up the ranks as a driver of inflation for small businesses over the last few years, according to our research.

‘The Government should do all it can to support employment levels in small businesses, as it is far better for businesses, employees, and the economy overall to have people in work.’ 

She added: ‘Before next year’s National Living Wage rise, the Employment Allowance must be uprated at the Autumn Budget to help small businesses to afford it. 

‘The Allowance helps with the cost of employment and, from today, it no longer covers the tax cost to the employer of four employees on the living wage, as was intended, as the NLW levels have outstripped it. It is time to restore its value.’