Businesses worried over living wage increase

Why are UK business groups uneasy about spending plans proposed by Chancellor Sajid Javid?

Carolyn Fairbairn CBI Director General

Carolyn Fairbairn, CBI Director General. Image copyright CBI. Attribution-NonCommercial-ShareAlike 2.0 Generic (CC BY-NC-SA 2.0)

Business groups in the UK have reacted with unease to some of the spending plans unveiled by Chancellor of the Exchequer Sajid Javid in his speech to the Conservative Party conference.There is particular disquiet over the proposal to raise the national living wage - currently £8.21 for those aged 25 and over - to £10.50 by 2024, and to lower the age threshold to 21.However, business leaders broadly welcomed plans for billions more spending on roads, broadband and public transport in what Mr Javid described as an "infrastructure revolution".

The Chancellor's plans are silent on how the Government would respond to a no-deal Brexit

As usual, though, the shadow of Brexit loomed large. Dame Carolyn Fairbairn, director-general of the Confederation of British Industry (CBI) said that while business warmly welcomed the fact the chancellor had outlined a plan for a modern, connected, low-carbon economy, "it feels like there was a page missing from his speech".She added, "It was silent on how the government and the Treasury would respond to the serious rupture caused by failing to secure a deal with the EU - and the implications for the investments he announced today.”Tej Parikh, chief economist at the Institute of Directors (IoD), commented, “The chancellor’s speech largely hit the right notes, but the prospect of no deal still looms large."And Adam Marshall, director-general of the British Chambers of Commerce (BCC), said a "messy and disorderly" Brexit would deliver a hammer blow to business confidence, investment and growth plans.

Low Pay Commission: how to increase wages without damaging job prospects?

On the living wage increase, Mr Parikh warned that all political parties must be wary of "playing a bidding war" with minimum wages."Raising the thresholds is a delicate balancing act, as too high a bar risks forcing firms to reduce staff numbers amid elevated costs, particularly with Brexit disruption on the cards. It’s crucial that the approach is evidence-based, which is why the Low Pay Commission was set up in the first place,” he said.Dame Carolyn added, “Business shares the chancellor’s ambition to end low pay. Increasing productivity is the only way to sustainable pay rises. The success of the independent Low Pay Commission has been its evidence-based approach to increasing wages without damaging job prospects. The commission will work best if it retains the ability to judge the pace and affordability of any future wage rises.”Mr Marshall said the government’s ambition to raise and simplify the National Living Wage was laudable but said the way to do so must be based on clear economic evidence and businesses given ample time to adjust to any changes."Companies already face significant cumulative employment costs, including pensions auto-enrolment, the Immigration Skills Charge and the Apprenticeship Levy, so government must take action to alleviate the heavy cost-burden facing firms, or risk denting productivity and competitiveness," Mr Marshall added.

£5 billion UK government commitment to improving the country's digital infrastructure

Meanwhile, Julian McGougan, executive director of the lobby group techUK, welcomed the £5 billion commitment to improving the country's digital infrastructure but warned there were many challenges ahead if the government's target of universal full-fibre by 2025 was to be achieved.The organisation pointed out that there were major problems to be overcome in deploying rural fibre and 5G masts but Mr McGougan said "techUK looks forward to working closely with our partners in government to tackle these challenges and achieve this ambitious target".

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