Chancellor George Osborne announced that the current £6.50 minimum wage is set to rise to £7.20 for those aged over 25 by April 2016. The rate will grow steadily over the following years to reach £9 an hour by 2020.

This news has sent shockwaves through the job market, according to Manpower. In its survey of 2,100 employers, it was suggested that many would be scaling back recruitment plans for the rest of the year.

James Hick, managing director of Manpower, said: “Some employers may seek to reduce the extra costs by taking on more younger or self-employed workers, who are not entitled to the living wage.”

One of the companies to make changes in a bid to pay for the living wage is Whitbread, which controls both Costa Coffee and the Premier Inn.

Out of Whitbread’s 42,000 staff members, around 34,000 are paid £7.20 or less – with 16,000 being over 25.

“I cannot rule out price increases,” said Harrison. “People are the company’s biggest single cost. We are supportive of a steady increase in the national living wage, but this is quite a big one – which came out of the blue in the Summer Budget.”

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He added that the group had not yet decided which prices might be raised and would reveal further details in October.

Harrison said: “We shall mitigate this substantial price increase over time with a combination of productivity improvements, boosted by investments in systems, training and efficiency improvements.

“At least it is much easier to absorb something like this in a fast-growing business which is set to create around 3,000 jobs this year.”

He claimed, however, that there would be a knock-on effect to the national living wage, 

“We are also looking at our differentials – because if the minimum wage goes up, so too do those of more senior employees,” he said. “We like to see pay increases based on experience and expertise and to reward people for making progress.”

By Shané Schutte