- The minimum wage for 18-to-20-year-olds is expected to rise from £10.85 to around £11.27 an hour.
- The National Living Wage for workers aged 21 and over is expected to increase from £12.71 to £13.20.
- Food manufacturers warn that higher labour costs could push up prices, with industry forecasts pointing to food inflation reaching 6.4 per cent by July 2027.
The UK minimum wage for workers aged 18 to 20 is expected to rise by 3.9 per cent to around £11.27 an hour, marking a slower increase for younger employees as the government balances its equal-pay pledge against concerns about hiring costs.
Chancellor John Healey is expected to announce the new rates in the Budget on Wednesday (28), with the changes due to take effect from April 2027. The figures were reported by The Times and have not yet been formally confirmed by the Treasury.
The rate for 18-to-20-year-olds currently stands at £10.85 an hour. The proposed increase would bring it closer to the National Living Wage for older workers, but leave a gap of £1.93 an hour.
For workers aged 21 and over, the National Living Wage is expected to rise by the same 3.9 per cent, from £12.71 to around £13.20 an hour.
The reported increases would represent a change in approach after two years in which younger workers received larger percentage rises. Since Labour returned to power in 2024, the minimum wage for 18-to-20-year-olds has increased by around 26 per cent, as the government pursued its manifesto pledge to remove age-based differences in minimum pay.
Business Secretary Jonathan Reynolds told the BBC that the commitment to equalisation remained in place, but that it could happen over time.
“You want not just good wages but good work,” he said, adding that the government had to balance pay with pressures in the labour market.
Why is the rise for younger workers slowing?
The expected increase comes amid concerns about employment opportunities for young people and the cost of hiring staff in sectors such as retail, hospitality and food production.
Employers have argued that rapid increases in wage floors can make entry-level recruitment more expensive, particularly for businesses with large workforces and tight margins. The government has given the Low Pay Commission greater flexibility to consider labour-market conditions when recommending rates for younger workers.
However, the slower increase has drawn criticism from trade unions, which argue that workers should not receive different minimum rates for doing the same job.
Andrea Egan, general secretary of Unison, said it was “deeply unfair” to maintain separate rates for younger and older employees.
“Twenty year-old care workers, teaching assistants and security guards do the same work as their older colleagues,” she said. “They don't pay less in the supermarket or at the petrol pump. They must be paid equally.”
The expected increase would narrow the gap between the two rates, but would not fulfil Labour’s pledge to move towards a single minimum wage for adults.
The policy debate also comes as employers face wider cost pressures, including higher energy bills, fuel expenses and the cost of ingredients. The impact of the wage decision will depend partly on how much businesses can absorb and how much they pass on to customers.
Could higher wages push up food prices?
Food manufacturers have warned that the proposed increase in the National Living Wage could add to the cost of producing groceries, raising the risk of further price increases for shoppers.
Balwinder Dhoot of the Food and Drink Federation said manufacturers wanted to pay fair wages but were already dealing with rising production costs.
“There's only so much that manufacturers can absorb, so without targeted interventions from Government there will be an impact on food prices,” he said.
Food producers have faced higher ingredient prices following extreme weather, alongside pressure from energy and fuel costs. If labour expenses rise further, companies could respond by increasing prices, reducing other costs or accepting lower margins.
Office for National Statistics figures cited in reports showed food and drink inflation at 1.3 per cent in the 12 months to September, while overall inflation stood at 3.5 per cent. The Food and Drink Federation has forecast that food inflation could reach 6.4 per cent in July 2027, although this remains a projection rather than a confirmed outcome.
Hospitality businesses have also warned that higher wages could add to pressure on an already cost-intensive sector.
Allen Simpson, chief executive of UKHospitality, said the expected increase would “add further pressure for hospitality businesses already grappling with substantial increases in costs”.
For restaurants, pubs and hotels, higher wage bills may be difficult to absorb if customers remain cautious about spending. Some operators could raise menu prices, cut opening hours or delay recruitment to manage the increase.
The Budget may include measures to ease household costs, including the removal of import tariffs on selected food products. The government has said the latest tariff changes, combined with suspensions introduced in June, could save households up to £21 a year. Reynolds acknowledged that the measures would not transform household finances on their own, but said they would contribute to wider efforts to reduce costs.
The central challenge is that higher minimum wages can improve earnings for lower-paid workers while also increasing employers’ expenses. Whether the expected rise brings a meaningful improvement in living standards will depend not only on the hourly rate, but also on inflation, working hours and the availability of jobs.
