The minimum wage in the UK is set to rise in April, with the hourly rate for workers aged 21 and over reaching £12.21. This increase, confirmed by the Chancellor ahead of the upcoming Budget, is part of a wider effort to support workers with a "genuine living wage," a key goal for Labour's leadership, according to Rachel Reeves.
The adjustment will benefit millions, including employees aged 18 to 20 and apprentices, who will also see a pay increase. However, many businesses have raised concerns about the impact of these rising costs, warning it may affect hiring rates.
Key Minimum Wage Changes for 2025
- For over-21s: The National Living Wage will rise by 6.7%, moving from £11.44 to £12.21 per hour, effective April 2025. This follows an increase earlier this year from £10.42 to £11.44.
- For 18 to 20-year-olds: The minimum wage will jump from £8.60 to £10 per hour, after rising from £7.49 earlier in the year.
- For apprentices: The wage will increase from £6.40 to £7.55, marking a notable rise from last year's £5.28.
This boost for younger workers represents a step toward creating a unified wage rate for adults, aligning with recent Low Pay Commission guidance to consider the cost of living in minimum wage calculations.
Nye Cominetti, principal economist at the Resolution Foundation, noted that while the increase is good news for workers, this year's 77p rise for over-21s is more modest than previous years. However, Cominetti suggested it’s a reasonable adjustment given the expected rise in National Insurance costs for employers in the coming Budget.
Mixed Reactions from Businesses
Business owners, especially small enterprises, have voiced concerns about rising wage bills. Christine Dobson Moore, owner of a small café, noted her struggles, saying, "Business has slowed down, and politicians don’t seem to understand the challenges we face."
Kate Nicholls, CEO of UK Hospitality, expressed apprehension about balancing budgets with increased wages, fearing it might harm the viability of businesses in hospitality. Meanwhile, Greene King pub chain’s Nick Mackenzie added that the "cumulative effect" of rising costs could pressure businesses to reduce jobs and cut investments.
Economic Impact and Potential Tax Adjustments
Paul Nowak, General Secretary of the Trades Union Congress, emphasized that minimum wage increases do not necessarily drive up unemployment, and argued they’re essential for supporting low-income workers, many of whom are women disproportionately affected by low wages. Young Women's Trust CEO Claire Reindorp also backed the rise, noting it helps address financial inequities faced by women in low-paid positions.
With expectations of increased National Insurance taxes to raise funding for public services, including the NHS, businesses are bracing for further impacts. Reeves is anticipated to propose a lower threshold for employer contributions, potentially raising approximately £20 billion. This change could lead businesses to limit wage increases for workers earning above the minimum as they seek ways to balance these added expenses.
While workers welcome the higher minimum wage, the looming tax changes and increased operating costs are creating an uncertain outlook for businesses, which may pass costs onto customers, potentially affecting job growth and investments.
The full economic impact of these changes remains to be seen, but this step towards a "genuine living wage" underscores the government's commitment to improving the financial stability of workers across the UK.