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Budget: Raising the national living wage could be “another nail in the coffin” for hospitality and leisure sector – Killik & Co

Following the comments on Government debt, OBR expectations and inflation during the Chancellor’s Budget, Rachel Winter, Associate Investment Director at Killik & Co, says:

“With UK government debt standing at an eyewatering level of over £2.2trillion, Rishi Sunak has the unenviable task of trying to rein in spending without stifling the country’s recovery from the pandemic.

“A key concern for many is the increasing level of inflation which has resulted from supply chain bottlenecks and energy price rises, with the OBR expecting inflation to average 4% over the next year. A shortage of truck drivers has contributed to the supply chain problems and the inflation in the UK, and today Sunak announced measures to attract more new drivers to the profession, including investment in lorry park upgrades.

“Despite taking measures to combat inflation, Sunak acknowledges that the issue will not be resolved overnight. Many people on lower incomes are experiencing a perfect storm, with living costs rising while temporary support measures such as the increase in Universal Credit have been taken away. The Chancellor has raised the national living wage to £9.50 per hour, which will help employees in the short-term but could be another nail in the coffin for businesses in the hospitality and leisure sector that have been hard-hit by the pandemic.

“Many businesses will be forced to put prices up to cover the higher wages, which could push inflation up further. Some firms may invest in automation to save money on wages in the longer run, and so a consequence of a higher living wage could be higher levels of unemployment.”

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