UK Pay Panel Sees £12.71 Minimum Wage; Think Tank Warns of £50bn Fiscal Gap

The UK Low Pay Commission said its central estimate points to a 4.1% increase in the National Living Wage in April 2026, lifting the hourly rate to £12.71. The projection signals another sizeable jump in labour costs for employers, particularly in retail and hospitality, at a time when inflation remains above the Bank of England’s 2% target. The wage forecast arrives as the National Institute of Economic and Social Research warns that Chancellor of the Exchequer Rachel Reeves is heading into the autumn Budget with what it calls an “impossible trilemma” of choices. The think tank estimates a £41 billion overshoot of Reeves’s goal to balance day-to-day spending by the end of the decade, rising to more than £50 billion if she reinstates a fiscal buffer scrapped by the previous government. NIESR says Reeves may have to consider fresh tax increases, deeper spending cuts or a relaxation of her fiscal rules to close the gap. Businesses, already bracing for the higher minimum wage and last year’s £26 billion payroll tax rise, are shifting more work to the self-employed in an effort to contain costs, according to industry surveys.