How will the national living wage affect construction firms?

The director of a home improvement firm has said that a cacophony of upcoming business changes could strangle economic growth.

Michele Wietscher, joint founder of Newview Windows & Conservatories, said that although the introduction of the National Living Wage is the right thing to do, it comes at a time when businesses are facing rising rates, energy costs and the introduction of auto-enrolment.

On April 1, 2017, the National Living Wage is set to increase to £7.50 per hour for workers aged 25 and over in the UK.

The decision has been lauded as a step towards financial equality in the UK as the government plans a shift from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society.

But Michele said we need to be careful not to put barriers in place for businesses to grow.

“It’s an emotive subject and it’s easy to look at national stories such as Sports Direct and make a reaction but to get to the nub of the issue it’s important to look at how it is being received in the ‘real economy’ – among shop keepers, entrepreneurs and those running privately owned firms,” Michelle said.

“With the increasing cost of energy, and the introduction of Auto-Enrolment, it may have an adverse impact on SMEs. What tends to happen in a small business is that pay goes up and hours get cut to balance the budget, or they have an employment hiatus. If you have a minimum wage that is above inflation, then you may be storing problems for the future and some businesses won’t have resilience.”

Michele says that at the bottom end, UK construction labourers earn, on average, £7.70 per hour – meaning the National Living Wage increase outside London will not represent a substantial pay boost for these workers.

This shows that the impact to the construction industry will be less than the retail sector for example and Michele also says that a bit of perspective is needed when people talk about the dire consequences of the introduction.

“When the minimum wage was introduced in 1999 Armageddon was predicted, when the actual result was sustained growth in the economy,” she said. “It’s also worth considering how Scandinavian and other European economies manage to run their economies, with higher pay rates. But on the flipside again it’s worth noting how much a cup of coffee costs in some of these countries.”

Newview already pay above the National Living Wage and employs over 50 members of staff. The firm operates across the retail, commercial and trade markets and counts companies such as Network Rail and Heathrow as clients.