Large retailers could see their wage bills rise by an average of £25.6m by 2020 as a result of the Government’s national living wage.

A PwC survey of 135 businesses with an average of 11,000 employees found that retail would be the most affected industry.

It will be hit almost twice as hard as healthcare, which polled the second highest wage bill hike with an average increase of £14.3m by 2020.

Chancellor George Osborne took the retail industry by surprise when he revealed the national living wage in July. As of next April the minimum wage for workers aged over 25 will rise from £6.70 an hour to £7.20, increasing again to £9 an hour by 2020.

Retailers expect next year’s increase to add £3.8m to their wage bills.

Calls for review

Former Kingfisher boss Sir Ian Cheshire, who is the Government’s lead non-executive adviser to the civil service, has called for a review in 2017 involving the Low Pay Commission over the expected impact of the minimum wage rising to £9 an hour.

About a third of respondents (32%) said they planned to pass on the costs on to customers and more than a quarter (26%) said they planned to reduce their headcount. Half were planning to change pay and grading structures.

“Employers who are able to quickly adapt to these changes and embrace them are most likely to thrive as they will be best positioned to attract and retain talent”

John Harding

PwC employment tax partner John Harding said: “The National Living Wage will be a great boost for millions of workers. Businesses have been given time to prepare for these changes and should be using this as an opportunity to introduce wider workforce interventions and technology to improve productivity, rather than defaulting to passing the costs on to consumers.

“Employers who are able to quickly adapt to these changes and embrace them are most likely to thrive as they will be best positioned to attract and retain talent.”