Whitbread living wage warning raises fear of price rises and job cuts
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Version 0 of 1. The price of coffee, beer and hotel rooms could rise to fund George Osborne’s “national living wage” after the group behind Costa Coffee and Premier Inn said it was looking at ways to offset the cost of the pay rise for more than 15,000 staff. The warning from Whitbread, which is worth almost £8.5bn, increases concerns that businesses will increase prices and cut jobs in response to the new pay rate. The company said in a statement that it plans to make “some selective price increases” and “efficiency savings” to mitigate the cost of the national living wage. Whitbread’s comments came a day after one of Britain’s largest recruiters, Manpower, said that the new pay rate is sending “shockwaves” through the labour market, with employers scaling back plans to hire staff. However, Simon Walker, the director general of the Institute of Directors, rebuked Whitbread for its comments. “I think there is a little bit of special pleading in this,” he said. “My Starbucks this morning cost £2.90 – I think there is some room in there for increased pay.” Under the chancellor’s plans, the minimum wage for over-25s will increase from £6.50 an hour at present to £7.20 in April next year, before rising to at least £9 by 2020. Whitbread, which also owns the Brewers Fayre pub chain, employs 34,000 staff who are paid less than £7.20 per hour, almost half of whom are aged 25 and over. It claims it will cost an extra £15m to £20m a year to comply with the new pay rate. Andy Harrison, its chief executive, said: “We are supporters of an increase in the national minimum wage. It is a good thing that everyone should benefit from the recovery [in the economy], and it will be a spur for greater productivity. However, it is a substantial increase and it is a challenge for companies like us.” Whitbread will also invest more in training and its IT systems to try to meet the cost of the national living wage by boosting the productivity of staff, it said. The company has promised to provide more details about its plans in October. It is the latest among a string of firms to warn about the effect of the national living wage. Mears, the outsourcing group, said raising the pay of its 4,000 care workers would reduce profits by more than 10% unless it passes on the cost to local councils and trusts, while rival Interserve said that £15m would be wiped from its profits. John Cridland, the head of the CBI, the influential business lobby group, will use a speech on Thursday to warn the chancellor that the impact on businesses from implementing the pay rate will be greater than he feared. The Office for Budget Responsibility, which produces independent forecasts for the government, has already estimated that the national living wage will lead to 60,000 job losses and reduce GDP by 0.1% by the end of the decade. Analysts at Hargreaves Lansdown, the stockbroker, said the policy would push up inflation in the UK as more companies increase prices. Laith Khalaf, senior analyst, said: “Paying more for cappuccinos and onion rings could be the thin end of the wedge when it comes to the living wage pushing prices up, because Whitbread won’t be the only company facing these issues. Businesses across the hospitality and retail sectors in particular will somehow have to manage the additional cost, which means higher prices for customers, lower profits for shareholders, or some combination of the two.” Related: Has George Osborne really introduced a living wage? However, Matthew Bolton at Citizens UK, the organisation behind the living wage campaign, played down the warnings. He said: “Raising the statutory minimum wage will always prompt a kickback from some businesses but frankly this increase for the over-25s is much needed and the chancellor is right to recognise the minimum wage has risen too slowly over recent years. “The low pay commission will have to be brave to push through the kind of increases the chancellor is suggesting, a rise to £9 by 2020. There will be a period where employers need to adjust to the new landscape. However it’s important to remember that we saw negative predictions around prices and jobs when the national minimum wage was first introduced, but employers managed to make it work.” The government is standing by the policy, according to a spokesman for the Department for Business, Innovation and Skills. “Britain deserves a pay rise and the government is making sure it gets one,” the spokesman said. “The independent OBR expects the national living wage to give a direct boost in wages for 2.7 million low-wage workers, with up to 6 million seeing their pay rise as the knock-on effects are felt higher up the earnings scale.” |