National Minimum Wage

Costs
2.139 Those representing business referred to the various
cost pressures that members, particularly small
businesses, were under, including the NMW. BHA,
BBPA and BISL said cost pressures remained a major
concern. However, as minimum wage rises had
moderated since 2008, it was no longer the
predominant source of concern about rising prices.
Other costs affecting the sector included food and
energy price rises; VAT and Excise Duty increases;
and costs resulting from other regulatory changes.
NHF evidence also referred to the rising costs their
member businesses faced. These inflationary
pressures came not just from the minimum wage, but
also other regulation, fuel costs, and the rise in VAT to
20 per cent. Salons were unable to offset higher VAT
through reclaimable purchases.
Margins & Profits
Chapter 2: The Impact of the National Minimum Wage
“Cost inflation is stifling the
growth of three quarters of
small firms….Small firms
are disproportionately hit by
increases in any business costs.
As their turnover and profit
margins are generally smaller
than large businesses, those
increases are harder to absorb.”
Forum of Private Business
evidence
2.140 ALMR reported almost all members responding to
its survey had experienced a reduction in business
“Employment costs (caused
profits as a direct result of minimum wage increases, by the minimum wage) were
with 61 per cent of members having to increase minimal compared to other
prices. But further price increases at this point were business costs.”
viewed as unsustainable by many. The Cinema
Unite oral evidence
Exhibitors’ Association told us the profitability and
performance of their sector was sensitive to changes
in the level of the NMW. In a survey by BIRA, 67 per
cent of respondents stated the NMW had affected their profits, up from 43 per cent on a
year earlier. East Anglia and the North were among the worst affected areas.
2.141 The Association of Convenience Stores reported that the impact of minimum wage increases
had become more acute in the last year. Across all areas, retailers had reduced staff hours,
seen reduced competitiveness and cut back on expansion plans. In a survey, 81 per cent of
its members had said that increased employment costs had affected the competitiveness of
their business.
2.142 However, some trade unions pointed to different evidence on the state of business profits.
Unite said that despite the recession, UK corporations made profits of £78.6 billion in the first
quarter of 2011. The TUC highlighted that corporate profitability for non-financial companies
in the service sector had risen and was now 1.4 percentage points higher than at the end of
the recession.
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