By Daniel Hunter

Small firms expecting to hire despite slight rise in unemployment, according to the Federation of Small Business.

Reacting to news that unemployment has risen by 15,000 to 1.85 million people between March and May 2015, John Allan, FSB National Chairman, said:

“Although unemployment is very marginally up, we believe the previously positive trend in employment growth will return in the second half of the year. Our latest small business index recorded the strongest small business hiring intentions since the index started in 2010. With a net balance of 14 per cent of our members planning to take on more employees in the next three months, we expect the march toward full employment to resume over the summer and into the autumn.”

Regarding the wage increase of 3.2 per cent, John Allan continued:

“Today’s figures tell a positive story on wages. The increase of 3.2 per cent demonstrates that, as economic conditions improve, businesses are better able to raise wages and share the rewards of economic growth.

“What is not yet clear is how the budget announcement of a new ‘national living wage’ will impact future wage and hiring decisions. Businesses in sectors such as retail and hospitality may struggle to absorb the additional costs without improvements in productivity — and will therefore seek alternative ways to pay for higher wages in the short term. The big unknown is what a significantly higher minimum wage will mean for employment levels and working hours in these sectors.

“It’s important the Low Pay Commission retains the freedom and flexibility under its revised remit to make future recommendations that reflect wider economic and business conditions, and if necessary deviate from the Government’s living wage target. A sustainable wage floor that is sensitive to swings in economic circumstances must be maintained.”