Pay rise for millions as minimum wage rises to £12.71 ...Middle East

Millions of workers will receive a pay rise next year after the Government confirmed minimum wage rates will increase.

Chancellor Rachel Reeves has accepted recommendations from the Low Pay Commission to increase wages by up to 85p an hour ahead of Wednesday’s Budget.

From April 2026 the National Living Wage will rise by 4.1 per cent to £12.71 an hour for workers aged 21 and over.

The Government said this will increase gross earnings of a full-time worker by £900 a year, for around 2.4 million workers.

The National Minimum Wage rate, which applies to 18 to 20-year-olds, will increase by 8.5 per cent to £10.85 an hour.

This will mean an annual wage increase of £1,500 for a full-time worker, which the Government said marks further progress towards establishing a single adult rate for over 18s.

The National Minimum Wage for 16 to 17-year-olds and those on apprenticeships will also rise, increasing by 6 per cent to £8 an hour.

In total the wage increases will benefit a total of 2.7 million young and older workers, the Government said.

Reeves said she had accepted the recommendations of the independent body because the cost of living is “still the number one issue” for many low paid people.

Wage growth blamed for inflationary pressures

The move was praised by unions, with the general secretary of the Trades Union Congress Paul Nowak saying the “above-inflation pay rise will make a real difference to the lowest paid”.

But sectors with high numbers of employees, which were already hit by increases to National Insurance Contributions in the last Budget, face a further rise in staffing costs.

The added costs to wages from both last year’s rise to the Living Wage and the NICs increase has been blamed for adding to inflation as employers pass on the cost to consumers. It has also been blamed for dampening the economy as fewer people are taken on and goods are more expensive.

In a speech in September, deputy governor of the Bank of England Sarah Breeden said: “The increase in the National Living Wage and the change to the threshold at which employers start paying NICs are thought to have pushed labour costs higher.”

However, the government argues that putting money in people’s pockets – a key pledge – will help with the cost of living crisis

Kate Nicholls, who chairs UKHospitality, said further increases to wages were “yet another cost for hospitality businesses to balance, at a time when they are already being taxed out”.

“Hospitality businesses have reached their limit of absorbing seemingly endless additional costs. They will simply all be passed through to the consumer, ultimately fuelling inflation,” she said.

The Resolution Foundation also warned the steep rise in rates for younger workers risked exacerbating the challenges this cohort has in finding employment.

Highlighting the rise in the share of young people who are not in employment, education or training – up 185,000 over the past year – the think tank said a “more conservative” approach would not have increased pressure on employment rates for this age group.

Reeves: We need to support business

This concern was mirrored by Matthew Percival, CBI Director of Work and Skills, who said: “We must ensure that these measures avoid undermining both economic growth and vital labour market initiatives like the Youth Guarantee.

“With young people already amongst the most affected by the lack of vacancies across the economy, we need to take extra care to guard against moves that might make it even more difficult to get young people into employment.”

The government said it had sought independent advice to strike the right balance between the needs of workers and the cost to businesses.

It pointed to the decision to cap Corporation Tax at 25 per cent and plans to reform business rates as examples of policy decisions designed to ease the burden on corporations.

Making the announcement on Tuesday, the Chancellor acknowledged the “need to support businesses while protecting jobs and the economy”.

“It is why we have capped corporation tax, and why we’re reforming business rates, particularly so that they help the high street,” she said.

Baroness Philippa Stroud, who chairs the Low Pay Commission said: “The recommendations published today are a product of diligent study of the evidence, careful reflection and significant negotiation.

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“Our advice balances the Government’s ambitions with the need to protect the economy and labour market, with rates that are fair and realistic.”

Reeves said: “Too many people are still struggling to make ends meet, and that has to change. That’s why today I’m announcing that we will raise the National Living Wage and also the National Minimum Wage, so that those on low incomes are properly rewarded for their hard work.

“These changes are going to benefit many young people across our country, getting their first job.”

Minimum wage hourly rates

April 2025

Aged 21 and over: £12.21

Aged 18 to 20: £10

Apprentices and under 18s: £7.55

April 2026

Aged 21 and over: £12.71 (50p increase)

Aged 18 to 20: £10.85 (85p increase)

Apprentices and under 18s: £8 (45p increase)

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