On 1 April, around 2.7 million British workers woke up to a pay rise. The National Living Wage climbed by 50p to £12.71 an hour for over-21s, the latest in a steady march of increases that have meaningfully improved the baseline standard of living for some of the country's lowest-paid people. They're not wrong to celebrate. Increasing wages is absolutely the right move. But let's not pretend this is happening in a vacuum.
Read the full article on Enterprise Nation: "Why Britain's wage rise is driving work overseas"
A Well-Intentioned Policy With an Uncomfortable Knock-On Effect
Behind the headlines, Britain's small and medium-sized businesses are sitting with a calculator and a sinking feeling. When the minimum wage rises, so does every associated cost, not least National Insurance contributions, which have already added close to £1,000 per employee per year. For a sole trader employing a small team, that's a meaningful hit. For an SME with 50 staff, it can be the difference between a growth plan and a survival plan.
The options available aren't appealing. Essentially businesses are faced with having to passing costs on to consumers, cutting hours or stop hiring. In the worst cases, let people go. None of these is a good outcome and cutting hours hits the very workers the legislation was designed to protect. The best wage in the world doesn't help if the job no longer exists.
The Pressure Facing Small Businesses
Businesses are already juggling rising costs, stubborn inflation, and slower growth. Add a higher wage bill, and plans for hiring, investment, and expansion start slipping down the priority list.
The result, over time, is a hollowing effect. Entry-level roles quietly disappear. Graduate schemes get shelved. The jobs that remain become more senior, more specialised, and harder to access for those without experience, ironically, for the very people a higher minimum wage was supposed to help most.
Why British Businesses Are Building Teams Abroad
When domestic costs push decisions offshore, the shift rarely announces itself loudly. It happens gradually and often reluctantly. According to a report by KPMG and REC, businesses are already making live decisions about whether to create jobs in the UK or abroad. The Legends Agency is based in Cape Town, South Africa, not because it’s chasing cheap labour, but because the domestic equation has stopped adding up.
South Africa has become a serious destination for strategic hiring: native English speakers, a time zone just one to two hours ahead of the UK, a highly educated workforce, and salary savings of around 50% compared to London equivalents. For an SME staring down a widening cost gap, that's a genuine lifeline.
Protecting British Jobs Means Supporting the Businesses That Create Them
If the government is serious about protecting British jobs, it needs to be just as serious about backing British business. That means examining the cumulative weight of regulation and cost being loaded onto employers, and considering what reliefs or incentives might help SMEs absorb wage increases without restructuring their way out of growth.
The workers who received a pay rise this April deserve it. But if the conditions that allow businesses to employ them are steadily eroded, the pay rise becomes beside the point. Higher wages are only meaningful if the jobs are still there.