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Business owners fear that National Living Wage won't increase productivity
70% of businesses are supportive of the new National Living Wage, though they do not anticipate that it will bring any improvement in productivity.
The findings come from the latest results from the Close Brothers Business Barometer, a quarterly survey which gauges sentiment from CEOs, MDs and other management from around the UK and Ireland.
From 1st April this year, workers over the age of 25 will see the minimum rate of pay increase by 50p to £7.20 - the largest increase in minimum wage since 2009. The change will impact over one million workers and could result in some taking home an additional £900 a year, according to the Department for Business Innovation & Skills. On the other side of the coin, the Regulatory Policy Committee estimates that the rise will cost companies £804.4 million in extra wages and staff costs.
A government survey revealed that 59% of workers impacted, will "feel more motivated at work as a result of the increase in their pay packets". While the workers themselves are feeling positive, findings from the Close Brothers Business Barometer suggest that business owners and managers are not so optimistic with 50% claiming that they do not believe that this will bring about a measurable increase in productivity.
When asked how they plan to offset the increase in staff costs, almost one in five (18%) were still unsure. The majority (51%) claimed they will do so by reducing costs in other areas. Only 6% said they would turn to funding as a solution.
Close Brothers offers alternative business finance solutions, including the release of funds from unpaid invoices and asset based lending. Reflecting on the latest Business Barometer results, David Thomson, chief executive at Close Brothers Invoice Finance, said:
"Rather than making cuts in other areas, or raising prices in order to combat a rise in overheads, UK SMEs should look to alternative finance solutions, such as invoice finance, in order to remain competitive and to keep cash flow healthy."
Invoice finance is used by more than 44,000 businesses across the UK and offers firms up to 100% of the invoice value within a day of it being raised. It provides vital cash flow support for companies that suffer from delays between monthly outgoings and payment from customers.
"The National Living Wage will have a massive impact on SMEs," warns David. "To be prepared for this, businesses need to look at a range of options in order to remain competitive and maintain a healthy cash flow."
17th March 2016