Commenting on the recent rise in the National Minimum Wage David Frost, Director General of the British Chambers of Commerce, said:

"Businesses cannot continue to absorb minimum wage rises that are in excess of average earnings growth in the UK. What we do not want to see is wage pressures becoming the tipping point over which firms have to reduce staffing, cut back on investment and be unable to grow. Future rises may have to be no more than the increase in average earnings to correct some of the adverse effects of recent increases."

This week's rise could have serious implications for UK businesses. Employment in distribution, hotels and restaurants has fallen by 55,000 over the year to March 2006.

Mr Frost continued, "There are risks of adverse effects in some areas where pay is relatively low. We are concerned that small businesses may find it difficult to cope with the new rates. But we are pleased that the Low Pay Commission will start future wage decisions with no presumption that further increases above average earnings are required."