The island’s Chamber of Commerce has welcomed the government’s U-turn on raising the minimum wage twice this year.

It says the original proposals could have been the ‘last straw’ for many struggling businesses.

Tynwald had been asked this month to approve plans to raise the minimum wage to the level of the living wage.

This would have seen the rate initially increase from £11.45 to £12.25 per hour from April 1, and then a further increase from October 1 to £13.05 per hour - which is the current level of the living wage.

But the government announced this week that the proposals have now been revised - April’s planned rise to £12.25 will go ahead but October’s proposed second increase has been deferred pending a review.

The Department for Enterprise and Treasury said this followed feedback from industry and a range of representatives.

In a paper sent to Tynwald members, the Chamber of Commerce had warned of the potential consequences and impact of a double increase in the minimum wage.

In a statement, it said: ‘We raised concerns when initial proposals were announced last month.

‘Chamber appreciates government must ensure that Isle of Man minimum wage rates remain competitive, and that lower paid workers are being affected by the rising cost of living too.

‘However, our members and the wider business community felt strongly that the initial proposals would have had a significant impact on businesses in sectors already under pressure due to other rising costs.

‘There was a serious risk that the original proposals could have been the last straw that led to more business closures and job losses.

‘We are therefore pleased that government has listened and revised the proposals that will be put before Tynwald.’

The Chamber’s white paper warned that employers are already facing ‘significant financial strain’, and without intervention the original proposals could have led to job losses and reduced working hours.

It said it would have led to higher consumer prices, job restructuring impacting most on younger and lower-skilled workers, and a contraction in key sectors, particularly hospitality and care, where businesses operate on narrow margins.

These concerns echoed the findings of a report published last year by consultants Pragmatix which warned that the drive to harmonise the living and minimum wage levels this year was ‘probably too fast’ and would cause significant disruption if not done in phases.

The white paper cited one large cafe owner who said they would need an extra 5,555 customers a year to cover the cost of the increase to £13.05.

An engineering business said they had put plans on hold to recruit a trainee due to the impending wage rise and one in the hospitality sector is quoted as saying: ‘Many in our sector are already cutting staff hours to survive. This increase will lead to further reductions and potential job losses.’

Enterprise Minister Tim Johnston said there was a need to ‘strike the right balance’ and he hoped to work with businesses to ‘find a way forward’.