Britain increases minimum wage by 4.1% - Over 2.7 million workers benefit. Businesses warn of price hikes
The UK government announced that the minimum wage will rise by 4.1% to £12.71 an hour from April next year, to bring it in line with the average wage, despite complaints from some employers that this will drive up prices. The British minimum wage is the second highest in Europe relative to the average wage and has increased by over 60% since 2019.
Finance Minister Rachel Reeves said the move, which follows a 6.7% increase earlier this year, was necessary “to ensure that those on low incomes are properly rewarded for their work.” The move will benefit 2.4 million workers aged 21 and over, while another 300,000 apprentices and workers under 21 will enjoy increases of between 6.0% and 8.5%, as the government continues to phase out the lower minimum wage for these categories.
The news comes ahead of Reeves' annual budget, which is expected to include huge tax increases worth tens of billions of pounds. "The cost of living remains the number one concern for working people and the economy is not working well enough for those on lower incomes," Reeves said.
Meanwhile, the move has been criticised by Britain's hospitality industry, which has warned that it will lead to price increases. The industry also says higher pay increases for less experienced workers could make it harder for young people to find work.
Britain had the highest inflation rate among major developed economies in October, at 3.6%, driven in part by a surge in wage growth after the pandemic. While the Bank of England expects inflation to return to its 2% target by mid-2027, many of its policymakers believe that wage growth above 3% will make it difficult to achieve that target, given still-weak productivity. Employers have said higher labor costs have weighed on hiring this year, while the unemployment rate has hit its highest level since 2021, at 5.0%.
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