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11 Oct 2016 12:30pm

Small businesses in financial distress following introduction of NLW

Nearly 100,000 small businesses are in a state of "financial distress" following the introduction of the National Living Wage, according to Begbies Traynor

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Caption: Nearly 100,000 small businesses forced to implement NLW "in financial distress"

The insolvency firm said that 97,342 businesses have been struggling to absorb the higher staff costs associated with the new regulation.

The figure includes 33,835 retail firms; 13,772 wholesale outlets; 13,071 transportation and logistics firms; 10,809 bar and restaurants; 10,019 food and drug retailers; 7,803 food and beverage retailers; 5,406 sports and health clubs and 3,347 hotels.

Six months after the introduction of the new wage, the number of companies in distress has risen by 18,000, according to the research.

The firm said that these numbers are expected to rise as the government plans to go ahead with its plans to increase the NLW to £9 an hour by 2020.

Julie Palmer, partner at Begbies Traynor, said, “My concern is that many of these struggling businesses may now be forced to take more drastic measures to manage their growing cost base, such as further cuts to staff numbers, reducing bonuses or even passing on the increased costs to the end consumer.

“For growing numbers of low wage employers in these sectors, the future looks decidedly uncertain.”

The partner added, “All eyes will now be firmly fixed on the Autumn Statement to see whether the new Conservative leadership will stay committed to George Osborne’s original National Living Wage policy or whether, in a post-Brexit world, the government’s priorities have shifted.”

The Federation of Small Businesses said last month that SME’s profits have taken a hit following the introduction of the NLW, with 47% of them citing wages as the main contributor to the rising cost of doing business.

Jessica Fino

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