The planned introduction of a new national living wage (NLW) for the over-25s continues to generate a mixed response across the sector, with more than 70% of operators in the UK’s eating and drinking-out market believing it will have a negative impact on their businesses, despite more than 60% believing it may improve staff retention and recruitment.

According to a survey carried out by M&C across 50 leading chief executives and managing directors, 73.5% believed the NLW would either have a slightly negative (50%) or significantly negative effect (23.5%). Just under 15% said the introduction of a NLW would have no impact, while just under 3% said it would have a slightly positive impact and c9% said it would have a significantly positive impact.

The minimum wage is currently £6.50 for those aged 21 and over, but under the Government’s new scheme, this will rise to £7.20 from April 2016. Although the NLW will only apply to those aged 25 or over, the rate will gradually ratchet from £7.20 up to £9 by 2020. In the eating and drinking-out sector, the current average hourly wage is £6.75, according to recent research by Fourth. To reach the £7.20 target by next April will require a 6.6% increase with a similar annual increase to arrive at the figure of £9 by 2020.

Just under 18% of the leading operators questioned said they would pass the potential increased labour cost on to customers, with c55% saying they would pass on some of the cost.

In terms of the impact on staffing levels, 70% believed they would see no decrease, while c24% would expect a slight decrease and c6% predict a significant drop.

When it came to the impact on retention levels of existing staff and aiding recruitment, just over 44% believed a NLW would lead to a slight improvement, while almost 18% thought it would lead to a significant improvement. The remainder (38%) thought it would lead to no improvement.

When asked which part of the sector they thought would be most negatively impacted by the new legislation, almost 60% opted for the fast-food/fast-casual category, over casual-dining brands, branded pub operators and, finally, independent pubs.