The Forum of Private Business (FPB) has called for a government investigation into the impact of minimum wage increases on smaller businesses. The national minimum wage is set to rise 30p to £5.35 an hour from 1 October for employees aged 22 and above. The rates for 18- to 21-year-olds and 16- to 17-year-olds rise to £4.45 and £3.30 an hour respectively.

The FPB’s chief executive Nick Goulding said: “The 34% increase in a period of five years is well above earnings growth and the periods between increases are too short to allow for proper analysis of the impact. If a small business were to increase the price of their goods or services by the equivalent increase in the minimum wage of 34% they would be committing commercial suicide!”

In an FPB survey of 2,000 smaller firms on the Minimum Wage, released in January 2005, 64% said an increase to £5.35 would have a bad or very bad effect on business.