70% of businesses are supportive of the new National Living Wage, but do not anticipate an improvement in productivity.
The findings come from the latest Close Brothers Business Barometer, a quarterly survey gauging sentiment from businesses owners and managers across the UK and Ireland.
From 1 April, workers over the age of 25 will see the minimum hourly rate of pay rise by 50p to £7.20 – the largest increase since 2009. The change will impact over one million workers and could result in some earning 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 the rise will cost companies £804.4 million in extra overheads.
A government survey revealed that 59% of those impacted, “will feel more motivated at work as a result”. While the workers themselves feel positive, findings from the Close Brothers Business Barometer suggest that employers are less optimistic with 50% claiming they do not foresee a measurable increase in productivity.
When asked how they would offset the increase in staff costs, almost one in five (18%) were still unsure. The majority (51%) planned to reduce costs in other areas. Only 6% had considered 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, CEO at Close Brothers Invoice Finance, said:
“Rather than making cuts in other areas, or raising prices to combat an increase in overheads, UK SMEs should look to alternative funding solutions, such as invoice finance for support.”
Invoice finance is used by over 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 support for companies that suffer from delays between monthly outgoings and payment from customers.
Thomson continued, “The National Living Wage will have a massive impact on SMEs. In order to be prepared, businesses should consider a range of options so as to remain competitive and maintain a healthy cash flow.”