CBI Warns National Living Wage Is A 'Gamble'

Next (Other OTC: NXGPF - news) has warned of price increases when the National Living Wage takes effect while the leader of a powerful business lobby group has described the policy as a "gamble".

The country's second-largest clothing retailer spoke up in a week when Whitbread (LSE: WTB.L - news) also confirmed it was planning targeted price rises to help it fund the new pay rules - due to take effect in April.

Their concerns on affordability were later mirrored by John Cridland.

In a wide-ranging speech, also covering exports and efforts to rebalance the economy, the CBI's director-general told an audience at King's College London: "It’s business investment which drives productivity growth.

"And it’s productivity on which wage growth depends. All three are now rising.

"But wages can only grow as businesses grow. A £7.20 National Living Wage in 2016 and a £9 National Living Wage by 2020 are laudable objectives, but they are a gamble.

"They depend on organic productivity improvements.

"And we should be careful what we wish for. Our jobs-rich recovery is a success which depends on entry level jobs and progression routes on our high streets and in our leisure sector."

Next (EUREX: NXTI.EX - news) said that it expected its prices to rise 6% between now and 2020 in order to accommodate wage growth, with 1% of that down to the National Living Wage, which it added was "manageable."

The Office for Budget Responsibility (OBR) estimates that the introduction of the wage could cause 60,000 job losses in total.

Manpower, the employment group, raised similar worries in a report this week which warned that firms were already scaling back on their hiring plans to account for the looming wage rise.

While it is due to take effect in April, the under-25s will miss out.

Manpower said the living wage could mean that "some employers may look to mitigate the extra costs by taking on more younger or self-employed workers, who are not entitled to the national living wage."

In July the Department for Business Innovation and Skills dismissed the more draconian job loss claims saying: "The Government believes the new National Living Wage is affordable given the strength of the UK economy and labour market."

It (Other OTC: ITGL - news) added: "The OBR forecasts an increase in employment of 1.1 million over the whole forecast period, with 700,000 of those coming after the National Living Wage is introduced in April 2016."