UK Firms Face 4% Minimum-Wage Rise In 2026, Early Estimates Show

Economic

Summary:

UK businesses are facing another inflation-busting jump in wage costs for their lowest-paid workers next year, the latest blow to labor-intensive sectors that have shed jobs in recent months.

The Low Pay Commission said indicative calculations suggest that keeping the minimum wage for workers aged 21 and over at two-thirds of median earnings would require a 4.1% increase to £12.71 ($16.896) from April 2026.

While this would be an easing from the 6.7% surge this year, it is another hefty increase for businesses to absorb after they were also hit by a jump in payroll taxes.

Tax data show that firms have shed more than 180,000 employees since October, when Chancellor of the Exchequer Rachel Reeves announced the minimum-wage increase alongside a £26 billion hike in employer national insurance contributions. Both came into effect in April. Hikes in the minimum wage often also push up wages for those further up the pay scale.

The LPC is an independent body that advises the government about the levels for the National Living Wage — the floor for hourly pay rates in the UK. Historically, governments have broadly accepted its recommendations.

Reeves’ first budget faced fierce criticism from businesses with labor-intensive sectors such as retail and hospitality suffering some of the biggest falls in employment.

The LPC cautioned that predicting the figure is challenging, saying there is a range around its central estimate from £12.55 to £12.86. The current NLW is £12.21 per hour.

The government restated the LPC’s remit, asking the body to ensure that the rate does not drop below two-thirds of median earnings.

“The Low Pay Commission should take into account the cost of living, inflation forecasts between April 2026 and April 2027, the impact on the labour market, business and competitiveness, and carefully consider wider macroeconomic conditions,” the remit added.

The commission will provide its advice to the government on the minimum wage rates for next year by the end of October.

Source: Bloomberg Europe

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UK Firms Face 4% Minimum-Wage Rise In 2026, Early Estimates Show

Source: Bloomberg Europe

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