Emer Moreau,Business reporterand
Oliver Smith,Business producer
iStock
Around 2.7 million people are set to receive a pay rise this week as the national minimum wage goes up by 50p to £12.71 for over 21s.
Workers aged 18-20 will see an 85p rise to £10.85, and under-18s and apprentices will get 45p more to £8 an hour.
Campaigners have welcomed the increases, but businesses have said the higher wage bills will force them to increase prices or cut staff.
The Low Pay Commission, the government agency which recommended the increases, said previous minimum wage rises for over-21s had “not had a significant negative impact on jobs”.
Prime Minister Sir Keir Starmer said wages were going up “for the lowest paid” but said the government “must go further to bear down on costs”.
Spencer Bowman is the managing director of of Mettricks, a chain of four coffee shops in Southampton. He says he would normally be “thrilled” to pay staff more, but “the cost increases have got to be sustainable”.
“There’s nothing that I’d want more than to ensure that my team can earn a really fair amount of money for a fair day’s work. And it’s been one of my long-term ambitions to see hospitality workers, my employees, paid far more.”
But Spencer says his business is being squeezed from every angle – as well as minimum wage, he has had increases in business rates, national insurance, and statutory sick pay. He also expects energy bills to go up because of the war in the Middle East.
“We’re running on a minimum number of staff on shift. We can’t run on fewer people,” he says.
“If something doesn’t give somewhere, we will be closing sites.
“It doesn’t make any sense. Revenue is up. Our customer numbers are up. But our costs everywhere have hit a point where we’re not financially sustainable and if that continues, there’s only one outcome for that.”
The minimum wage increases are on top of a 6.7% rise for over-21s and a 16.3% rise for 18 to 20-year-olds respectively last year, when there was also a rise in employers’ National Insurance contributions.
Labour committed in their election manifesto to remove “discretionary age bands” and increase the wages of 18 to 20-year-olds so they are paid the same as those over 21.
Ifunanya Ezechukwu, 25, calls the minimum wage rise a “step in the right direction”.
“Especially with the cost of living being really bad, people need more money so they can actually afford the basics,” she tells BBC Newsbeat.
She doesn’t think employers paying staff more will necessarily translate to fewer job opportunities.
“I feel like they’re probably just going to up the prices of their services, so I don’t think there’ll be less job opportunities,” she says.
“I just feel like some things might get more expensive, which is unfortunate, and then the cycle just continues.”
Alex McCarthy, a university student who works part-time in a pub, says he is feeling “very, very happy” about the rise.
But the 18-year-old says it probably won’t be enough for some of his friends, who are working while living at university but are still struggling to do weekly shops and are having to borrow money off their parents.
Amelia Evans, 18, believes the rise is necessary because “everything is going up in price”. But she is concerned it will limit her job opportunities.
“So far this year I think I’ve done maybe 20 applications, and haven’t got any. I feel like it’s going to impact me even more now.”
When Chancellor Rachel Reeves announced the increases in the Budget last year, she said the cost of living was still the biggest issue for working people.
“The economy isn’t working well enough for those on the lowest incomes,” she added.
At the time, the Treasury said the new minimum wage rates for 2026 struck a balance between “the needs of workers, the affordability for businesses and the opportunities for employment”.
The Living Wage Foundation has welcomed the rises but says they do not go far enough.
The Foundation calculates what is known as the Real Living Wage, which it says is a more accurate reflection of the cost of living in the UK. It currently stands at £13.45 across the UK and £14.80 in London.
Kate Chapman, the executive director of the Living Wage Foundation, said one in seven businesses now pay the Real Living Wage.
“That’s because they know the Living Wage is good for people, good for society and good for business,” she said.
The British Chamber of Commerce has said that tax and labour costs are the biggest concerns for British businesses.
In its quarterly survey of 4,000 firms, 73% said labour costs are putting pressure on them to raise prices.
Additional reporting by Georgia Levy-Collins, Lizzy Bella, and Jemma Crew
