Firms fear impact of living wage, says CBI survey

British businesses were concerned about the effects of a living wage on economic growth, according to a business lobby group.

The Confederation of British Industry (CBI) surveyed 342 companies on their employment plans for 2016 and whether the Chancellor's living wage initiative would impact their intentions.

Two in five firms said they planned to increase their workforce next year - with the good news being new permanent jobs outstripped temporary positions.

But employers also appeared concerned by rising labour costs as a result of the £7.20 an hour wage rate which was due to come into force in April, along with the plans for an apprenticeship levy.

"There's a danger of government complacency, with companies facing multiple increasing costs through the apprenticeship levy, the national living wage and unreformed business rates", said CBI director general Carolyn Fairbairn.

"These are acting as a cumulative drag that could hamper growth."

In the CBI survey, half of service sector companies said they did plan to increase prices as a result of the living wage, with one in four intending to employ fewer staff.

That's despite government plans to cut the corporate tax rate to 18%, which it has said would offset any rise in labour costs faced by employers.

"The government must be careful not to sacrifice prosperity for political expediency by saddling businesses with costs that could harm investment, which is critical to increasing productivity", Fairbairn added.

CBI's report also suggested that skills shortages were seen as a top threat to the attractiveness of the United Kingdom as a place to do business, with any further restrictions to skilled migration hampering business activity.