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How SMEs can afford the Chancellor’s minimum wage hike

Small businesses are facing some serious headwinds and the Chancellor’s proposal to significantly increase the minimum wage threatens to make the climate even tougher. How can these firms manage extra costs? Alternative finance can help.

The Chancellor has pledged to increase the minimum wage to £10.50 an hour, extending the rate to all workers aged 21 (it is currently £8.25 an hour for workers aged 25 and over). This populist policy promise comes hot on the heels of an announcement from the Labour Party saying that they will put the rate up to £10 per hour.

While steps to establish fairer pay are welcome (the hike would be good news for low-wage workers, in particular ones aged between 21 and 25), the impact of a such a significant jump in the minimum wage would be far less positive for small businesses, which are already battling to manage a rash of policy and non-policy costs against the backdrop of weak market conditions.

Small business owners are having to manage costs relating to the auto-enrolment pension scheme, late payment, business rates, GDPR, cybersecurity, digitalisation, broadband technology and more. These costs are putting serious pressure on cashflow and the fear is that a hike in the minimum wage will be, for many, the straw that breaks the camel’s back.

So, how can small businesses manage the cost of a big bump in the minimum wage (and the raft of other costs)?

Alternative finance can help.

In the wake of prolonged caution from traditional lenders, a position that Brexit is helping to entrench, alternative finance facilities such as invoice finance, asset finance, peer-to-peer lending and crowdfunding are proving a vital source of capital for small businesses, both for safeguarding cashflow and for essential investment, including in employee recruitment and retention.

This is how a small business in Sussex used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the capital to invest in new equipment.

While politicians’ promises should always be taken with a sack or three of salt, the Chancellor’s pledge to ramp up the minimum wage highlights the pressure that small businesses are already under and the need for owners to be aware of all the finance options available to them, including alternative finance.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.

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