The planned two-step increase in the minimum wage this year will ‘inevitably’ have a significant impact on struggling small and medium sized businesses, says the island’s Chamber of Commerce.

Tynwald next month will be asked to back an increase in the hourly rate from £11.45 to £12.25 per hour from April 1, with a further increase to £13.05 per hour from October 1, bringing it in line with the current level of the living wage.

But the Enterprise Minister has acknowledged that the increases may cause concern particularly to small businesses already having to deal with challenging economic times - and this was why the rise was coming in two steps to give firms time to prepare.

The Chamber of Commerce said it welcomed the fact the government had listened to its concerns about the speed at which the new minimum wage rate was being introduced.

But it questioned whether the time was right and called for the first increase to be deferred to later in the year.

A spokesman said: ‘Chamber has been raising concerns with the government for some time regarding the impact of multiple rising costs on our members and the wider business community.

‘Last autumn the proposal was to increase the minimum wage to £13.73 per hour from April 2025. We are therefore pleased that government has listened and proposed lower rates with a phased approach which gives businesses more time to adapt.

‘However, at a time when so many SMEs are struggling, any increase in the minimum wage will inevitably have a significant impact.’

The Chamber of Commerce represents more than 500 organisations, including many small independent businesses and those in sectors such as retail and hospitality that would be most affected by the increases.

‘Over the past year we have seen a number of independent local firms close, so the last thing anyone wants is minimum wage increases being another rising cost that leads to more businesses and jobs being lost,’ said the spokesman.

‘Instead of increasing the minimum wage to help those most affected by the rising cost of living, there is an alternative option which is to increase the tax thresholds for lower paid workers.

‘If the proposals are approved in February, then it’s essential that the government introduce the increased support which has been promised to help businesses adapt.

‘We would therefore appeal to Tynwald members to give careful consideration to whether this is the right time to increase the minimum wage – or whether it’s in the interests of employees, businesses and the economy to defer the first increase to later in the year.’

Enterprise Minister Tim Johnston said: ‘We recognise that many businesses are navigating significant challenges and that these proposed increases may cause concern and have an impact on businesses, particularly small businesses, in our domestic economy.

‘The hope is that the two-step increase will allow them more time to prepare and will also help those in our domestic economy trade through a valuable TT period before further wage increases arise.’