Business Finance: Mark Prince sets out the business case for the National Living Wage

Mark Prince of KPMG.

Mark Prince of KPMG. - Credit: Archant

We usually associate the living wage with campaigns for the rights of employees, but the announcement in the Summer Budget that a National Living Wage is to be made compulsory isn’t just good news for the two million people who will get a significant pay rise.

Businesses should also be welcoming the announcement, as it will see them profit from a significant productivity boost.

It’s easy to see why the business case can be overlooked, as the case for the individual is so compelling. The East of England is not far behind London and the South East as the third most expensive region to live, and house prices in the region rose by the fastest rate outside of London last year.

Yet educating businesses about the benefits they will experience is crucial, because as wages rise to £7.20 and eventually to £9 an hour by 2020, enterprises mindful of payroll costs need to be assured that they will see a return on this investment.

Every business owner wants a highly motivated and productive workforce – it’s the reason big budgets are carved out for training schemes and employee benefit packages, and it’s here that the new National Living Wage can make a difference.


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Prominent economists, such as the current chair of the Federal Reserve, Janet Yellen, have argued that higher wages lead to greater productivity, lower staff turnover, improved morale and an improvement in the average quality of job applicants. Indeed a recent Scottish government report concluded that increased productivity is highly likely to outweigh the cost of paying the National Living Wage for many organisations, and this is something that KPMG has experienced since becoming an accredited Living Wage employer in 2006.

As we finally move into a period of higher demand and growth in our economy, productivity remains a problem. Output per hour worked in the UK is still 2% below its pre-crisis peak.

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The new National Living Wage is no substitute for investment in infrastructure and skills, yet it can play a role in making the productivity advances our economy requires. So when it comes in, enterprises across the UK and East Anglia can rest assured that the benefits won’t be far behind.

: : Mark Prince is head of enterprise for KPMG in East Anglia.

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