'What do I cut to fund minimum wage rise?'

Ken Wright, co-owner of the Phoenix Arts Club, is worried about the future of his business

About two million of the UK's lowest-paid workers will get a pay rise from Thursday as the minimum wage goes up.

The headline National Living Wage will rise by 2.2% to £8.91, the equivalent of more than £345 a year for a full-time employee.

But Ken Wright, co-owner of the Phoenix Arts Club in Soho, is wringing his hands in despair over how he will afford the pay rise during a pandemic.

"What we've been asked to do is more, with less," he told the BBC.

He said the rise "may not seem like a lot" but has come at the "worst possible time" for events and hospitality firms like his, which were hit hard by lockdown.

'Something has to go'

He also finds it hypocritical that the government won't be giving a pay rise to the lowest paid workers still on furlough.

"Yet they expect independent small businesses to somehow have the ability to find the money, without realising that a number of them in hospitality have been closed for three quarters of the last year," he told the BBC.

He said he fervently supported paying a fair living wage, but that the government should do more to fund it.

"My question to the Treasury is: what do I cut in order to fund this? Something has to go."

From Thursday, the National Living Wage will be given to 23 and 24-year-olds for the first time, not just those aged 25 and over.

Statutory rates for apprentices and those aged between 18 and 22 will also rise, along with the voluntary "Real Living Wage".

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Ministers said the increases would particularly benefit workers in sectors such as retail, hospitality, cleaning and maintenance.

Prime Minister Boris Johnson said it would be "a welcome boost to families right across the UK".

Minimum wage increases from 1 April:

• From £8.72 to £8.91 an hour for workers over the age of 23

• From £8.20 to £8.36 for those aged 21-22

• From £6.45 to £6.56 for 18 to 20-year-olds

• From £4.55 to £4.62 for under-18s

• From £4.15 to £4.30 for apprentices

'Bounceback will be down to customer service'

Bill Nettelfield, owner of Bill and Bert's gift shop in Colchester, has a differing view to Mr Wright.

Bill Nettelfield, owner of Bill and Bert's gift shop in Colchester, says paying well ensures loyal and reliable staff

He already pays his three permanent part-time staff above the minimum wage, at nearly £11 an hour, and plans to continue to do so.

"It's going to come down to customer service, and your staff will be worth every penny because the customers will be there," he told the BBC.

"If you pay them properly, they give great service. The bounceback is going to come down to customer service - something the national retailers don't do very well, with the exception of maybe Lush."

Those keen on his approach could try paying the voluntary Real Living Wage, which will rise to £10.85 an hour in London and £9.50 outside the capital on Thursday.

Currently only a small minority of employers have signed up to pay it, and the foundation behind it warned of a "substantial gap" between the statutory rates and one reflecting the actual cost of living.

Commenting on Thursday's wage rises, shadow chancellor Anneliese Dodds hit out at the "pay freeze" for furloughed workers.

"Hitting Britain's families in their pockets isn't just wrong - it's economically illiterate. If families have less money to spend, then businesses will suffer and the recovery will take longer," she said.

Frances O'Grady, general secretary of the Trades Union Congress, also said nobody should be expected to get by on less than the minimum wage.

"Low-paid workers on furlough have bills to pay like everyone else," she said.

"The government should guarantee that everybody will get at least the full rate of the minimum wage. And it should give all minimum wage workers a decent pay rise."

'Wiped out'

Mike Hawking of the Joseph Rowntree Foundation described the boost to the minimum wage as "necessary", but said that the pandemic had revealed the urgency of taking further steps to tackle in-work poverty.

"As we start to recover from the impact of the last year, too many workers are finding that minimum wage increases are being wiped out due to inadequate social security, insufficient hours available to them, and high housing costs."

Bryan Sanderson, chairman of the Low Pay Commission, which recommends the level at which the minimum wage should be set, said: "This week's increase is our first step towards the government's target of two-thirds of median earnings.

"It is a real-terms increase, meaning that an hour's work can buy more than it could last year at the start of the pandemic. The level of the new rate, however, also reflects the need to protect workers from job losses."

The commission said its best estimate for the National Living Wage rate in 2022 was £9.42, but this is subject to more uncertainty than usual and is likely to change.