HR · 12 October 2015

Vince Cable warns small firms in the North East will be put out of business because of the national living wage

The former business secretary was one of the biggest Liberal Democrat casualties in the May general election
The former business secretary was one of the biggest Liberal Democrat casualties in the May general election
Former business secretary Vince Cable has warned that small firms in the North East could be hit particularly hard by the government’s incoming national living wage.

He said the impact on the region as a whole, following what is meant to be a boost for low-paid workers, will be exceptionally negative. Businesses on the smaller scale will find it difficult to pay the higher rate, while the effect of tax credits disappearing for some 148, 000 low-income families, means there could be a double hit. The benefit cut alone could take 300m out of the regional economy.

Low-income households are usually supported through tax credits but what is happening under the Osborne initiative is low-income families are going to lose money. The impact will be particularly felt in sectors like care and retail, he warned. A lower income can negatively affect a person’s credit rating and therefore result in lower lending rates, an effect of this could be an increase in bad credit mortgages (see

When it came to the national living wage, Cable admitted he was very worried about what George Osborne was doing. It got him a good headline on the day, but it could do an awful lot of economic damage.

He felt much happier with the older model used in the coalition and under the Labour government, with the minimum wage set by the Low Pay Commission.

While Osborne has repeated his aims to bring about a Northern Powerhouse and redistribute the balance of the UK economy, recent news has shown London is still dominant in many respects, with the economic gap between the capital and the North of England set to grow.

While 89, 000 new businesses were created this year, nearly a fifth of those were in London more than the total number of firms in Scotland, Northern Ireland, Wales and the North East of England combined.

Cable said the current situation meant the North East wouldn’t be fertile ground for the Conservatives for a while, as the rhetoric is far ahead of what is actually being delivered.

The effect of the national living wage on the North East will also be exceptionally negative because a lot of small firms that are just about surviving will be put out of business.



Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.