The average wage in the hospitality industry rose by 2.5% in January in response to the Government’s New Year National Living Wage announcement, the latest research from Fourth has revealed.

As a result of the Government promise to up the NLW to £8.72 by April 2020 (an increase of 6.2%), the average hospitality industry wage rose to £8.84 last month.

According to Fourth, the figures suggest the start of a sustained period of wage inflation to meet the new legislative threshold, which is currently 12p higher than the average hourly rate.

With an average hourly wage rate for 25-year-olds and above at £8.45, the hospitality sector will be disproportionately affected, the research suggested.

The average wage for over 25s has steadily risen by 6% on average each year, over the last three years. For example, in 2018 the NLW increased to £8.21, whereas the average hourly wage for 25-year-olds and above was £8.60.

“Historically, businesses have paid a premium above the NLW to attract and retain the best employees, and January’s rapid wage inflation shows that this is set to continue over the coming months, where it may well rise by a further 2-3% between now and April, as operators continue to seek the best staff,” said Mike Shipley, vice president of analytics at Fourth.

Shipley predicted that a 5-6% spike in the hourly rate over one quarter could impact businesses significantly, potentially reducing net profit margins by up to 1-2%.

In some cases, this may end up “adding significant labour cost pressures on operators and squeezing already tight margins. To mitigate this, it’s imperative that operators look at measures to drive efficiency and productivity across the business utilising smart technology,” he said.