Chancellor Rachel Reeves has sparked fear among struggling businesses after announcing billions in new costs for bosses. This afternoon Ms Reeves yet another hike in minimum wage, including a whopping 8.5% rise for 18-20-year-olds.

The National Living Wage for 21-year-olds and upwards will increase by 4.1% to £12.71 from 1 April 2026, with the salary for 18-20 year olds rising to £10.85 an hour. Announcing the hike, the Chancellor insisted it would help tackle the cost of living crisis. She boasted: “Too many people are still struggling to make ends meet. And that has to change.

“That’s why today I’m announcing that we will raise the National Living Wage and also the National Minimum Wage, so that those on low incomes are properly rewarded for their hard work.”

However hospitality businesses warned the move will add a whopping £1.4 billion in new costs for the already struggling industry.

UKHospitality said the move once again increases the sector’s tax burden, and demanded that the hike is paired with reform of business rates.

Kate Nicholls, chairman of the body, said: “Increases to minimum wage rates are yet another cost for hospitality businesses to balance, at a time when they are already being taxed out.

“These additional costs make action at the Budget to reduce hospitality’s tax burden even more important, especially if businesses are expected to sustain this level of annual wage increase.

“Hospitality businesses have reached their limit of absorbing seemingly endless additional costs. They will simply all be passed through to the consumer, ultimately fuelling inflation.”

Ms Nicholls added that the particularly large rise in minimum wage for the youngest workers will further fuel a crisis in rising numbers not in education, work or training.

“When there are almost a million young people not in employment, education or training, this will put further pressure on already fragile youth employment rates. Given the Government’s ambition to help young people back into work, this level of increase is concerning.”

Shadow Business Secretary Andrew Griffith agreed, telling the Express it is a “kick in the teeth” for the industry.

“At a time when we face the risk of ‘generation jobless’ it is reckless of the government to jack up wages for 16 to 20 year olds faster than inflation with no plan to help businesses hire.

“On top of tax rises and union red tape it’s another kick in the teeth for hospitality and retail businesses.”

The minimum wage hikes mean a salary increase of £1,500, or £900 for a full-time worker on the National Living Wage.

“Young workers have bills like everyone else and deserve a fair day’s pay for a fair day’s work. It’s right they see a larger rise as youth rates are phased out”

Rob Ferguson, Sales and Production Director of Aford Awards, is furious that smaller businesses are “being pushed closer and closer to the edge of the cliff” for the third year in a row.

“The Government fails to appreciate just how much decisions like this affect small businesses such as ours. We’re already grappling with the impact of last year’s hike to the National Living Wage and the increase to employer National Insurance Contributions. We’re already struggling to keep apace with spiralling utility costs and trying to keep price inflation under control, so this is another hammer blow.

“Rachel Reeves speaks of being a ‘pro-business Government’, but she must be delusional. Her decisions are hammering small businesses. We were nearly pushed off a cliff last year, and we’re having to pick up the burden yet again. We feel abandoned and deeply let down by Labour. I’m not sure how much longer we can cope with picking up the pieces.”