New living wage could close horticultural businesses

According to a new report from the National Farmers’ Union (NFU), horticultural businesses will be made uncompetitive and unprofitable within four years by the introduction of the New Living Wage (NLW) coming in April this year at a rate of £7.20 per hour.

This is because horticultural crops have unusually high seasonal labour requirements and wage costs can account for 60 per cent of turnover. The report forecasts that over the next five years the cost of the NLW to horticultural businesses would be between 129 per cent and 158 per cent of current profit, rendering them unprofitable very quickly.

In addition, growers will have to pay additional employers’ National Insurance Contributions (NICs), which the report predicts will cost the equivalent of between 11 per cent and 15 per cent of current business profits.

Although the Government has offered mitigation measures including corporation tax and employment allowances, the research found that these will not even cover the additional employers’ NIC costs.

The report concludes by saying that, as UK production becomes unprofitable there is a very real risk that the cost of the NLW will lead to a reduction in home grown produce, which will increase the reliance of the UK market on imports.

The NFU is therefore urging the Government to scrap Employers’ NICs for seasonal workers and to reintroduce a seasonal workers’ scheme for agricultural student workers, most of whom would be under 25 and come from a number of different countries across the globe.

The organisation is also asking retailers and others in the supply chain to work with grower members and suppliers to discuss the contents of the report and to work towards a scenario where growers are confident they will at least make some profit.

If you operate a horticultural business or you are concerned about the impact the National Living Wage will have on your enterprise then our team at Moore Thompson can help you.

To find out more about our services for the farming sector and rural businesses, please contact us.