26 October 2015

A chat with a retailer and reader of Auto Retail Agenda this week raised a very interesting point about the new National Living Wage – the new name for the UK’s minimum wage.

We were initially talking about the outlook for new car registrations and how long the figures could keep growing. Whether or not you think the registration figures are a good indicator of new car sales, there are some key economic influencers on people’s (or a population’s) ability and desire to buy a car. One of these is employment. If employment is growing then more people will buy a car.

From April 2016 the Government will introduce the new mandatory National Living Wage for workers aged 25 and above, initially set at £7.20 – a rise of 50p relative to the current minimum wage. The Government claims that’s a £910 per annum increase in earnings for a full-time worker on the current minimum. And the latest government stats show that more than 1.2 million people are on the minimum wage – although it’s less clear how may of these people are working full time.

Now, as an employer this could be a rising cost if some of your workers are currently at the minimum. Something no business really wants. However, the flip-side is that all these people will have more money in their pockets at the end of the month and will therefore have greater spending power.

With so many workers gaining an enforced pay rise next year, will we also see a rise in new car sales? Let’s hope so, otherwise the National Living Wage will be just another erosion of profitability, something we could well do without.

Tristan Young

Editorial director

Auto Retail Network

Tags: employment, national living wage, sales