In April, the Government introduced the new National Living Wage (NLW), which set a minimum wage rate for those aged over 25 of £7.83 per hour.

However, latest findings from the Federation of Small Businesses (FSB) show that the majority of small firms (60 per cent) were already paying their employees at least this amount before the new rate was introduced.

However, of those that have seen their wage bills rise as the result of the NLW increase, seven in ten (70 per cent) are reducing profitability or absorbing costs. Four in ten (41 per cent) are increasing prices and one in three (30 per cent) are curtailing investment plans.

The impact of a higher NLW is felt particularly acutely in certain sectors. A significant majority of both small retailers (60 per cent) and accommodation and food services firms (71 per cent) report that the new rate is putting upward pressure on wages.

The wage bill is just one area where businesses are facing cost pressures. This year also saw a rise in employer auto-enrolment pension contributions, while business rates and utility costs are all on an upward trend.

As shown by FSB’s research, the vast majority of small business owners absorb rising costs by taking less for themselves. However, there’s only so much they can do before, ultimately, they have to also cut back on investment in productivity-enhancing measures such as new technology, innovation and training.

We already know that low productivity is a big issue for the UK. If rising costs today are allowed to hold back much-needed investment for the future, the situation is certain to get worse. It’s important for the Government to at least maintain the Employment Allowance. It should also deliver on the promise of National Insurance holidays for small firms that employ those furthest from work.

I hope to see these and other small-business-friendly measures included as priorities by the Chancellor in his Autumn Budget. Because minimum wages are all well and good, provided businesses can operate at maximum productivity.