Finance Minister Rachel Reeves announced the increase on the night of October 29, before presenting her first budget on October 30, which includes sharp increases in spending, investment and taxes.
The new Labour government that came to power in Britain in July has said the minimum wage should match the cost of living and support low-income earners.
"The government has made a commitment to a real living wage for workers. Raising the wages of millions of workers is a major step towards delivering on that commitment," said Finance Minister Rachel Reeves.
The announcement of a 6.7% increase in the UK minimum wage means that full-time workers will see their hourly pay rise from £11.44 ($14.87) to £12.21 ($15.88) from April 2025. For younger workers (who earn lower hourly rates), the increase will be 16.3% for 18-20 year olds and 18.0% for 16-17 year olds.
The minimum wage for 18- to 20-year-olds will rise from £8.60 ($11.18) to £10 ($13) an hour, the biggest increase in the data’s history, according to Bloomberg. This is part of Labour’s plan to align the two wages and create a single minimum wage for workers.
Overall, the minimum wage increase will have a direct impact on around 3 million workers in the UK.
The Low Pay Commission (LPC) said employers had faced a minimum wage increase of more than 20% in two years. "The data shows some signs that employers are finding it harder to adapt to rising minimum wages," said LPC chair Philippa Stroud.
The Confederation of British Industry trade body said the minimum wage increase would put pressure on business finances and limit their ability to spend on investment.
The Resolution Foundation, a think tank focused on living standards, said the announcement of a minimum wage increase on 29 October in the UK was good news for low-paid workers but the LPC should monitor the unintended consequences of the policy, such as employers using more freelance workers to cut costs.
The Bank of England is closely watching wage growth as it assesses whether inflationary pressures in the economy have eased enough to warrant further interest rate cuts, Reuters noted.
The minimum wage increase for more than 3 million workers is again well above the rate of inflation in the UK. Bloomberg Economics expects UK inflation to average just over 2% in the current financial year and in 2025-26. UK private-sector pay growth fell below 5% in the three months to August, while public-sector pay growth next year is expected to range from 4.5% to 6.5%.
