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Labour’s plan to introduce a “genuine living wage” for all workers could lead to inflation and job losses, economists at HSBC have warned.
Sir Keir Starmer’s party intends to revamp the Low Pay Commission, ensuring it considers the cost of living in its wage recommendations and abolishing age bands for minimum wages so all adults benefit from higher pay rates.
HSBC economists Elizabeth Martins and Emma Wilks cautioned that the proposed higher minimum wage might compel companies to cut jobs and sustain inflation, which could delay interest rate reductions by the Bank of England. They noted that increased minimum wages could drive up unit labour costs, potentially leading firms to reduce headcounts and maintain inflationary pressures.
In parallel, Rachel Reeves, Labour’s shadow chancellor, announced plans for a global investment summit within 100 days of a Labour election victory. Speaking to business leaders in the City, Reeves emphasised Labour’s commitment to being “pro-business and pro-investment.” The summit aims to attract foreign investors who have been wary of political instability in the UK.
Reeves highlighted the need for a reset in government-business relations, positioning the Treasury as a growth-focused department. She also outlined Labour’s intention to reset Britain’s trade relationship with the EU, seeking closer alignment with EU rules in industrial and financial sectors, countering what she described as the Conservative government’s adversarial approach.
Labour’s recent manifesto, criticised by some for lacking detail, is being expanded upon by Reeves. She underscores Labour’s ambition to foster better trade relations globally, addressing regulatory alignment with Europe as a non-contentious issue for Leave voters.
Reeves’ statements underscore Labour’s strategic vision to enhance economic stability and growth by fostering closer ties with Europe and encouraging foreign investment, while addressing domestic economic challenges.
