April’s NMW increase likely to be killed off by energy and technology shocks to the labour market

The new National Minimum Wage (NMW) and National Living Wage (NLW) become effective from the beginning of April. These changes have significant consequences for workers, employers and the national economy. However, at a time of rapid geopolitical change, soaring energy costs and exponential adoption of AI, UK workers may continue to feel that they are running to stand still.

As we turned into 2026, early signs were that growth was likely, with inflation falling towards the government’s 2% target and an expected reduction in interest rates on the horizon. However, the economic shock of the war in the Middle East has changed forecasts dramatically. In this post we look at how the increases in the NMW and NLW may now impact UK workers and businesses amidst an unprecedented landscape of change and uncertainty.

NMW and NLW from April 2026

Wage band	April 2025 rate	April 2026 rate	Change
Age 21 or over (NLW)	£12.21	£12.71	+ 4.1%
Age 18 to 20 (NMW)	£10.00	£10.85	+ 8.5%
Under 18	£7.55	£8.00	+ 6.0%
Apprentice	£7.55	£8.00	+ 6.0 %

From April, adult workers employed for 37.5 hours per week will earn a wage of £476.63 before deductions. This is the equivalent of approximately £24,784 per year. However, it is unlikely that this increase will help households struggling with rising cost-of-living pressures. While the 4.1% increase beats early 2026 inflation (approximately 3%) the war in the Middle East has triggered a surge in energy and other costs. In mid-March the Institute for Fiscal Studies reported a 67% increase in wholesale gas prices, a 35% increase in oil, and a 17p per litre hike at the petrol pump. With forecasters predicting a rise in household energy bills of more than £300 a year from July, the NLW increase is likely to be wiped out by these elevated costs alone.

In turn, rising energy costs significantly impact food prices by inflating production, processing, packaging and transportation expenses. With small profit margins, food producers often pass on these costs to consumers, adding further pressure to household bills. Alongside cumulative price rises in rent/mortgages and Council Tax, workers are not likely to feel any better off when April’s pay slip arrives.

For employers already battling financial headwinds, challenges will include higher payroll costs through the increase in NMW and NLW; and also through the associated increases in employer NICs, pension contributions and accrual of holiday pay. Industries such as social care, healthcare, hospitality and retail (that employ a larger proportion of workers on lower pay) are likely to see the biggest increases.

With younger workers being awarded a larger percentage increase, businesses may also rethink their hiring strategies. This would be particularly damaging to the government’s Get Britain Working drive to reduce NEET rates (not in education, employment or training) amongst the younger population. According to the ONS, UK retailers employ an estimated 1.1 million people aged 16 to 24; almost 50% of hospitality workers in restaurants, bars and coffee shops are young people. Facing higher wage bills, these industries may pass costs on to consumers as higher prices, leading to cost-push inflation, further inhibiting economic growth.

The current geopolitical and economic environment is particularly turbulent for small businesses due to stagnating inflation, higher energy costs and supply chain disruption. To mitigate the effect of rising salary costs, they may have to increase pricing, reduce headcount, remove overtime, or cancel other discretionary benefits. Thus, workers in those businesses may not experience meaningful change, despite any increase in their hourly pay.

In conclusion, the UK labour market is changing. The balance of power is shifting towards employers because of spiralling costs, the increased Minimum Wage and increase in employer National Insurance Contributions. The technological shock of AI alternatives is also becoming ever more tangible, with many industries seeking to automate to improve efficiency, reduce cost overheads and protect themselves from heightened compliance risks under recent employment rights reforms.

Increasing NMW and NLW is therefore a trade-off. Low-income households and young workers may be better off in theory, but in real terms, higher costs and a weakening labour market may mean that very few will enjoy any meaningful benefit this time around.

For the full version of this article, please follow the link below.

Headstart HR Horizons April 2026.pdf

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