Britain raises minimum wage by six percent

LONDON, Mar 20 (Reuters) Britain raised its minimum wage by six percent on Monday, pleasing trade unions but prompting complaints from business leaders that an increase way above inflation would lead to job cuts.

The government said the adult minimum wage would increase to 5.35 pounds (.40) an hour in October from 5.05 pounds now, benefiting over 1.3 million employees.

This is the eighth increase in the minimum wage since it was introduced by the Labour government in 1999. At six percent, the rise is around three times the rate of inflation. The previous increase took effect last October.

''The minimum wage jumped 12 percent between 2003 and 2005 -- a rate of increase far in excess of average earnings growth,'' said Digby Jones, director general of the Confederation of British Industry (CBI).

''More and more companies are finding it difficult to absorb the rise so another 6 percent will be the last thing they need.'' Miles Templeman, director general of the Institute of Directors, said the pay hike would ''further erode business competitiveness and damage job creation prospects''.

''There is now a real risk that the national minimum wage could lead to significant job losses as the economy weakens,'' he said.

But the Trades Union Congress (TUC) welcomed the announcement and said the main beneficiaries would be women.

''The minimum wage has been one of the government's boldest and most successful reforms,'' TUC General Secretary Brendan Barber said. ''The government was right to stand up to the employer lobby.'' The Transport and General Workers Union and UNISON also hailed the increase although UNISON General Secretary Dave Prentis said it should have been bigger.

''(We) would like to see the minimum wage raised to 6.50 pounds an hour which is the minimum amount needed to give workers a living wage without dependence on in-work benefits,'' he said.

Business leaders welcomed a recommendation from the Low Pay Commission, which advises the government on the issue, that this should be the last above-inflation increase in the minimum wage.

''(This) is a sensible response to employer concerns that the minimum wage is starting to have a damaging impact on competitiveness,'' the CBI's Jones said.

REUTERS SY KN2248