70% of hospitality operators foresee negative impact of National Living Wage

By Mark Wingett

- Last updated on GMT

News of the introduction of a National Living Wage next month is drawing a mixed response from bosses in the hospitality industry
News of the introduction of a National Living Wage next month is drawing a mixed response from bosses in the hospitality industry

Related tags: National living wage, Minimum wage

More than 70 per cent of restaurant and pub operators believe the introduction of the National Living Wage for the over-25s next year will have a negative impact on their businesses, according to a survey carried out by M&C Allegra Foodservice.

The survey of 50 leading chief executives and managing directors from the eating and drinking out market by BigHospitality's sister publication M&C​ found that the National Living Wage generated a mixed response, however, with 60 per cent believing it may improve staff retention and recruitment. 

According to the results, 73.5 per cent believe the Living Wage would either have a slightly negative (50 per cent) or significantly negative effect (23.5 per cent).

Just under 15 per cent said the introduction of a National Living Wage of £7.20 per hour for over-25s from next April would have no impact, while just under 3 per cent said it would have a slightly positive impact and 9 per cent said it would have a significantly positive impact.

 The minimum wage is currently £6.50 for those aged 21 and over, but under the Government’s new scheme, this will rise to £7.20 from April 2016.

Although the National Living Wage will only apply to those aged 25 or over, the rate will gradually ratchet from £7.20 up to £9 by 2020.

 In the hospitality sector, the current average hourly wage is £6.75, according to recent research by Fourth. To reach the £7.20 target by next April will require a 6.6 per cent increase with a similar annual increase to arrive at the figure of £9 by 2020.

Just under 18 per cent of the leading operators questioned said they would pass the potential increased labour cost on to customers, with c55 per cent saying they would pass on some of the cost.

 In terms of the impact on staffing levels, 70 per cent believed they would see no decrease, while c24 per cent would expect a slight decrease and c6 per cent predict a significant drop.

When it came to the impact on retention levels of existing staff and aiding recruitment, just over 44 per cent believed a National Living Wage would lead to a slight improvement, while almost 18 per cent thought it would lead to a significant improvement. The remainder (38 per cent) thought it would lead to no improvement.

When asked which part of the sector they thought would be most negatively impacted by the new legislation, almost 60 per cent opted for the fast­ food/fast ­casual category, over casual ­dining brands, branded pub operators and, finally, independent pubs.

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