Labour faces backlash over plans to hike minimum wage as hospitality warns of impact on jobs

Labour has been told there is only so much more that hospitality firms can take as it faces a backlash over plans to hike the minimum wage.Restaurant and shop bosses have said they desperately need to be given breathing space on taxes at today’s Budget, as further wage rises risk making it even harder to hire.The Chancellor will reportedly announce plans for a 3.9 per cent increase and effectively end Labour’s manifesto pledge to bring the rate for younger people into line with that for older workers in this parliament.The national living wage, which applies to those aged 21 and over, is set to rise from £12.71 to around £13.20.And the national minimum wage, which applies to 18- to 21-year-olds, will rise in line with this, from £10.85 to around £11.27, according to The Times. Hospitality bosses have complained of further rising costs as the Government is set to hike wagesBusinesses have been bruised by inflation-busting wage rises over the past two years, as well as shock increases to National Insurance contributions (NICs) paid by employers.But although this would represent a smaller rise in wages than previous years, High Street bosses warned that extra costs would feed into prices and limit recruitment plans.The chiefs of some of Britain’s biggest firms, including Sainsbury’s and Marks & Spencer, have been lobbying the Government for a reprieve after mounting costs across hiring, energy and business rates.UKHospitality chief executive Allen Simpson, who represents household names including Hilton hotels and Greene King, said the reported wage increases ‘represent a considerable additional burden that many businesses will struggle to absorb.’He added: ‘This announcement makes it even more important that the Government uses the Budget to back hospitality businesses by reducing the sector’s tax burden. Without action to address mounting cost pressures, operators will have less capacity to invest, create jobs and drive growth in communities across the country.’The 2024 Labour manifesto promised to 'remove the discriminatory age bands, so all adults are entitled to the same minimum wage, delivering a pay rise to hundreds of thousands of workers across the UK'.Mr Healey admitted in an interview last week that there was a 'trade-off between the level of the minimum wage and the employment rate' and he was 'acutely conscious' of the impact on young people's prospects.Former Pizza Express entrepreneur Hugh Osmond said that pubs and restaurants are major providers of first jobs and ‘at the heart of every community’.‘You would have hoped a Labour Government would understand this before taking measures that will put yet more hospitality venues out of business and further destroy our already decimated high streets,’ he added.Helen Dickinson, chief executive at the British Retail Consortium (BRC), said that entry-level and flexible jobs are ‘most at risk’ and called on the Government to roll back some of its changes to employer NICs.She wants to see the threshold to start paying employer NICs raised from £5,000 to £6,000, claiming this would help retailers ‘to tackle the youth unemployment crisis that threatens to spiral out of control.’Former Chancellor Rachel Reeves’ raid, announced in 2024, saw the annual salary threshold at which NICs must be paid by employers cut from £9,100 to £5,000. The change in April 2025 also saw the NICs rate rise from 13.8 per cent to 15 per cent.The BRC estimates that the NIC policy has, together with rises in minimum wages, cost the sector £6.5billion and 115,000 jobs.The High Street reeled as employers were liable to pay the tax on many more workers, including young people employed on a part-time basis.Craig Beaumont, executive director of the Federation of Small Businesses, added: ‘Labour is now holding back living wage rises because they have pushed taxes up on business too far. Cutting taxes for small businesses is the only way to get higher wages and more jobs.’Gavin Peck, the boss of retailer The Works, said that ‘more needs to be done’ to help both retailers and out-of-work young people.He said: ‘If the Government wants to support youth employment and economic growth, raising the National Insurance threshold for employers and delivering serious business rates reform would give retailers greater confidence to invest and recruit.‘High streets remain at the heart of communities, but businesses can only continue investing in stores and creating jobs if the environment supports them to do so. The retail industry has an important role to play in economic growth, skills development and the regeneration of town centres, but that requires policy decisions that recognise the pressures businesses are facing and remove barriers to investment.’DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you