The Federation of Small Businesses (FSB) has called on the government to consider whether forthcoming rises in the National Living Wage (NLW) rate may need to be delayed if the economy cannot bear the pace of change.
By 2020, the NLW will have risen to £8.75 per hour. The business group has suggested that any risk to the UK economy should be 'built into the next NLW increase', which is currently scheduled for April 2018.
The NLW should not rise any higher than £7.85 next year, the FSB has suggested.
The call to delay further increases comes following the FSB’s publication of new research, which revealed that 64% of small firms affected by the NLW have taken lower profits in order to meet the latest rate rise.
43% of small businesses have had to increase their wages to meet the demands of the NLW, the research also suggested.
Mike Cherry, National Chairman of the FSB, said: 'Small employers have demonstrated their resilience in meeting the challenges set by the NLW, with many cutting their margins or even paying themselves less to pay their staff more.
'In sectors where margins are tight, small firms are resorting to more drastic measures to cope with the NLW.
'It's vital that the NLW is set at a level that the economy can afford, without job losses or harming job creation. Cost pressures on small businesses are building, and with most recent economic indicators underperforming, we are now facing the reality that the NLW target may need to be delayed beyond 2020.'