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ENTERPRISE: Plea on how minimum wage is hitting firms.

With the National Minimum Wage set to jump to pounds 5.35 per hour, the Forum of Private Business has called for a thorough investigation into the effect on smaller businesses

From October 1, the rate for employees aged 22 and over will rise by 30 pence per hour, while that for 18 to 21-year-olds and 16 and 17 year-olds will jump to pounds 4.45 and pounds 3.30 respectively.

But with the increases outstripping inflation, the FPB's chief executive Nick Goulding believes there is a genuine need to formally assess the impact on smaller businesses.

"The 34 per cent increase over five years is well above earnings growth and the periods between increases are too short to allow for proper analysis of the impact," he said.

"The level and rate of change in the NMW is hampering competitiveness and job creation in smaller firms

"If a small business were to increase the price of their goods or services by the equivalent they would be committing commercial suicide!" he added.

An FPB survey of 2,000 smaller firms on the subject, released last January, revealed that just under 40 per cent of respondents believed the increase in October 2004 for those aged over 21, was having a bad or very bad effect on their business. Sixty four per cent believed a further rise to pounds 5.35 would have a bad or very bad effect on their business.

The FPB's research analyst Andy Mowlah said the statistics show an increasing opposition to further hikes.

"This highlights businesses' growing unease with the National Minimum Wage when compared with previous FPB research. In June 2001, an FPB survey of 2,000 members showed that just 24 per cent of respondents thought an increase would have a negative impact.

"The National Minimum Wage is a direct increase in the cost of employment and smaller businesses who operate on already tight profit margins might not be able to absorb this."

The FPB welcomed the news that the Low Pay Commission had been instructed by the Government for the first time to take into account its impact on small firms.

Mr Goulding said they must seize the opportunity.

"Nothing but a thorough investigation into the National Minimum Wage will do. We support workers' rights to earn a competitive income but not at the expense of small firms, after all it is the performance of business which creates employment.

"The Government must realise that continued increases have serious consequences for small firms. The FPB firmly believes the National Minimum Wage should be linked to the retail price index."

Meanwhile Mr Goulding has stepped up the FPB's fight with the supermarkets, claiming suppliers are increasingly the victims of unscrupulous behaviour.

"There is a growing trend for large retailers to pass the cost of difficult trading periods or even expansion onto their suppliers. There is no protection for these companies who live in fear of large customers taking away their trade should they refuse to comply."

The FPB is currently representing suppliers of both Matalan and New Look in disputes over payment terms.

"It is wholly unacceptable that these unfair practices go on unchecked, they are abuses of buying power," Mr Goulding said.

The FPB is also calling on the Government to give more clout to the Better Payment Practice Group.


Nick Goulding
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Jul 12, 2006
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