National Living Wage poses threat to crops

Growers of many horticultural crops face a "significant threat" from the likely additional increases to employment costs under the National Living Wage (NLW) due to be introduced on 1 April, according to a report by consultancy Anderson's for the NFU and published last month.

Ali Capper: “We need government recognition" - image: HW
Ali Capper: “We need government recognition" - image: HW

Analysing the effect of NLW, with or without proposed increases in employers' National Insurance contributions, on three model businesses of different sizes, it found that by 2020/21, wage inflation would be "broadly equivalent to or in excess of current business profit", which the authors reckoned at 5 per cent of current turnover for each.

It pointed out: "Mitigation in the form of reduced Corporation Tax is not applicable to a proportion of horticultural businesses. Furthermore, the benefits of reducing rates of Corporation Tax and increased Employment Allowance are considerably less than the increases in employers' National Insurance contributions - i.e. there is a net increase in total employer taxation."

The NLW will replace the national minimum wage, currently £6.70, for all workers over the age of 25. Initially set at £7.20, it is due to rise to £9.35 by 2020, entailing an annual rise of just under 7 per cent each year for five consecutive years, compared to the roughly 2.5 per cent recent annual rises in the minimum wage, the report pointed out.

It said higher production prices leading to higher retail prices, reduced consumer demand and consumption, and an increase in imported produce would be likely consequences.

NFU horticulture and potatoes board vice chair Ali Capper said: "We need government recognition that NLW will have a huge impact on this sector, particularly for labour-intensive crops such as hand-picked fruit and vegetables where labour costs can be as high as 70 per cent of turnover. We need Government's help to mitigate some of the immediate impacts, or our businesses will fail."

She put these concerns to e meeting farming minister George Eustice last month, seeking more time to implement the changes, and arguing for employers' National Insurance contributions for seasonal workers to be scrapped.

She told HW afterwards: "George Eustice and his team were very receptive to understanding and supporting the issues. We have agreed that all actions will be progressed with the relevant government departments and at this stage it is work in progress."

She added: "We are also urging the food supply chain and retailers to consider NLW costs, so that British farm businesses can continue to supply high quality affordable food to British consumers."

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