Starting a new business? Get 40% off our accountancy services for 3 months! 😀


Small businesses are predicting that policy reforms will have a damaging effect on them, research by the Federation of Small Businesses shows.

Tight Profit Margins

The survey of 1,261 FSB members found that 38% of small employers fear that the new national living wage of £7.20 an hour will have a negative effect on their business when it comes into force in April 2016. The figure rose to 54% when respondents were asked about the longer-term prospect of the National Living Wage rising to £9 per hour by 2020.

“Over half of our members already pay their staff above the voluntary living wage, but those that don’t are often operating in highly competitive sectors with very tight margins,” said John Allan, the FSB chairman. “In many of these industries, the only sustainable way to deliver real long-term wage growth is to improve productivity. Without improved productivity there is a real risk that higher enforced statutory wages will lead to fewer jobs being created and, unfortunately in some cases, to job losses.”

Just 6% of the employers surveyed believed the new Living Wage would have a positive effect on their business.

Cutting Their Cloth

The FSB survey also asked businesses how they intended to cope with the change when the new National Living Wage comes into effect.

The FSB’s latest Cost of Employment Index, a comprehensive model of wage and non-wage costs for small businesses across a range of sectors, estimates that the extra cost of paying the National Living Wage to six full time staff aged 25 or over and earning the current adult minimum wage will be £5,900 a year from April 2016. Auto-enrolment pensions will also put extra financial stress on small businesses.

The FSB is warning that it’s likely these factors may be contributing to a dip in small business confidence shown in their research.
John Allan said: “With the economy recovering it is right that employees should be rewarded with a pay rise – but we cannot allow wages to become a political football. It’s important that the independent Low Pay Commission continues to play a central role in setting the minimum wage, and that includes deviating from the Government’s plan to raise the National Living Wage to over £9 an hour by 2020, if it becomes apparent that the economy cannot afford it.”


About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

More posts by this author
Inline Feedbacks
View all comments

Read more posts...

Architects and Tax

Architecture is a highly diverse sector when it comes to tax. It’s partly down to the type of businesses that carry out…

Read More

June 2022 Client of the Month: Manea Kella

This month we spoke to Adrian Manea, architect and director at Manea Kella, a London based RIBA Chartered architecture and interior design…

Read More

Succession Planning for Business Owners: What Comes Next?

When you own a business, it’s extremely normal to feel like you’re surviving one day to the next – ‘winging it’, as…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.


You only need this service if you want us to complete the bookkeeping on your behalf.

Would you prefer to complete your own bookkeeping?


Call us on 020 3355 4047 if you’re not sure.