- Minimum wage rose 4.1% to 12.71 pounds for 2026 on Wednesday
- Low Pay Commission sees 2027 minimum wage of around 13.18 pounds
- Pay body, businesses dispute impact on hiring of younger workers
- Youth unemployment rate highest in 10 years at end of 2025
LONDON, April 1 (Reuters) - Britain's minimum wage may need to rise by around 3.7% next year to 13.18 pounds ($17.38) an hour to keep up with the likely rise in average earnings, the public body which advises the government on the rate said on Wednesday.
The Low Pay Commission gave the projection as part of an annual consultation with employers, unions and the public that begins just as 2026's 4.1% rise in the minimum wage to 12.71 pounds an hour takes effect for workers aged 21 and over.
The commission said its 2027 forecast was provisional and that the hourly minimum rate could rise to between 13.02 pounds and 13.34 pounds next year depending on broader earnings growth.
"The current economic uncertainty makes it essential that the Commission hears from those affected by the minimum wage and builds consensus for evidence-based recommendations," Philippa Stroud, the Conservative lawmaker who chairs the commission, said.
Britain's minimum wage has risen by around 50% since April 2020 and is one of the highest as a share of average earnings in advanced economies, as a result of policy by successive governments to raise it to two thirds of median earnings.
The rate for workers aged 18-20 has risen even more sharply, and many businesses and economists blamed it for a sharp rise in youth unemployment to a 10-year high at the end of 2025.
The Bank of England also watches wage growth keenly - and views pay rises just above 3% as potentially inflationary - although the Low Pay Commission said wages for the lowest paid amounted to a relatively small share of the national wage bill.
About 6% of British workers aged 21 and over are paid the minimum wage or very close to it, but this rises to around 20% of younger workers.
The Low Pay Commission said it was "alert to concerns about young people's employment prospects" but disputed that the higher minimum wage was to blame.
Its own analysis showed that the biggest drops in employment of 18-20 year olds in the two years to April 2025 had come in areas with the highest proportion of young people whose pay was already above the minimum, such as parts of London.
Britain's Labour government has promised to end what it calls "discriminatory" lower pay rates for younger people.
But in an updated remit for the Low Pay Commission last month, the government gave it "full flexibility" on the rate it recommends later this year.
($1 = 0.7586 pounds)
Reporting by David Milliken; Editing by Hugh Lawson
Source: Reuters