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Business leaders support living wage - but don't expect productivity boost

The new National Living Wage will not lead to a boost in productivity, according to 50% of bosses.

The majority do, however, support the new pay initiative.

The findings come from the latest results from the Close Brothers 'business barometer', a quarterly survey which gauges sentiment from senior managers in the UK and Ireland.

From April 1, workers over the age of 25 will see the minimum rate of pay increase by 50p to £7.20 – the largest increase in minimum wage since 2009.

The change will impact over one million workers and could result in some taking home an additional £900 a year, according to the Department for Business Innovation & Skills. 

However, the Regulatory Policy Committee estimates the rise will cost companies £804.4 million in extra wages and staff costs.

A government survey revealed that 59% of workers affected, “will feel more motivated at work as a result of the increase in their pay packets”. 

But, findings from the Close Brothers’ survey suggest that business owners and managers are not so optimistic with 50% claiming they do not believe that this will bring about a measurable increase in productivity.

When asked how they plan to offset the increase in staff costs, almost one in five (18%) were still unsure.

The majority (51%) claimed they will do so by reducing costs in other areas. 

Only 6% said they would turn to funding as a solution.

David Thomson, chief executive at Close Brothers Invoice Finance, said: "The National Living Wage will have a massive impact on SMEs.

“In order to be prepared for this, businesses need to look at a range of options in order to remain competitive and maintain a healthy cash flow."

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