10 Sectors Facing Change as the UK National Minimum Wage Rises

At the heart of the Autumn Budget 2025 announcement was a further rise in the UK national minimum wage, set to take effect from April 2026. It’s a move designed to support workers. However, for employers, it brings renewed pressure on costs, margins, and workforce planning.

The increase lands alongside wider economic challenges, rising overheads, and skills shortages, to name a few.  For many businesses, especially those with large or lower-paid workforces, the impact will be felt quickly. In this article, we delve into how the changes to the National Minimum Wage might impact sectors across the UK and Ireland and provide ways in which you can manage the cost.

What’s changing from April 2026?

From 1 April 2026, the National Living Wage (NLW) for workers aged 21 and over will rise by 4.1% to £12.71 per hour. The minimum rate for 18–20 year-olds will increase by 8.5% to £10.85 per hour. And for 16–17 year-olds and apprentices, the rate will rise by 6% to £8.00 per hour.

What the Minimum Wage in the Budget Means for Your Sector

1. Public Sector, Not for Profit & Education

“The Public & Not For Profit sector is vast and diverse. Public sector bodies are government-funded, so national minimum wage increases are usually covered through funding uplifts, shielding them from extra costs.

While the UK minimum wage 2025 budget announcement is welcome for employees, it has a budgetary impact on the organisations themselves.

Charities face a tougher reality. While the 2025 Budget increase is positive for employees, it puts pressure on organisations with uncertain income. A 4%+ rise in the National Living Wage, following recent National Insurance increases, drives up employment costs. With no way to pass these on to customers, charities may need to draw on reserves or reduce services.” – Andy Shaw

2. Energy & Infrastructure

“On initial assessment, the minimum wage increase has lower direct impact on energy and infrastructure markets than other sectors. The main point of contention for the sector remains the Energy Profits Levy, which continues to shape investment decisions and long-term planning, presenting challenges to domestic supply and the overall UK energy system.

With the backdrop of challenging energy policy, attracting new talent into the industry, particularly early careers professionals, is an ever-increasing concern. Concurrently, an undeniable upturn in headcount rationalisation in the sector will result in the industry losing a portion of its highly skilled workforce.” – Gregor Angus

3. Health & Social Care

“The Health & Social Care Sector will have a significant impact from the UK minimum wage rise, particularly because many sub-sectors have large wage commitments relative to their overall cost base (50–70% of income).

Impact includes:

• Residential and domiciliary care: Operators face further pressure on profit margins, depending on whether individual local authorities in England and Wales, or COSLA in Scotland, increase fee rates to match rising costs. Groups with a higher percentage of Local Authority funded residents relative to private will be hit hardest, as they have limited ability to increase fees to offset.
• Community pharmacies: Typically, heavily reliant on NHS reimbursement, limiting their ability to pass on cost increases to customers.
• Senior pay impact: Upward pressure on minimum wages can also affect management staff, as organisations try to maintain pay differentials across grade structures.

These pressures could increasingly constrain operational flexibility and financial planning across the sector.” – Alistair Stewart

4. Leisure & Hospitality

“For leisure and hospitality, minimum wage changes land fast and hard.  With a high proportion of hourly-paid roles, the increase to employer NIC  will push workforce costs up quickly, often overnight.

Key pressures include:

• Increased wage bills across front-of-house, kitchen, cleaning and seasonal staff
• Knock-on effects on pay differentials for supervisors and managers
• Greater pressure on margins already squeezed by energy, food and business rate costs

This can intensify financial pressures and affect staffing decisions across the business.” – Ian Bremner

5. Family Business

“For family businesses, minimum wage increases can feel personal. Teams are often small and loyal, with long-standing employees who sit close to the new thresholds. When wages rise, expectations follow.

Cash flow can tighten, particularly where profits are reinvested rather than drawn out. There may also be difficult conversations around fairness, progression, and sustainability. These decisions aren’t always purely commercial.

What matters most is taking a measured approach and  with the right family business advisory, many family firms can safeguard both their people and their legacy.” – Feargal McCormack

6. Food & Drink

“The food and drink industry runs on tight margins across production, processing, and distribution leaving businesses highly exposed to increases in labour costs. The Autumn Budget 2025 minimum wage changes add extra cost pressure, with some areas of the workforce feeling the impact most:

• Production-line and warehouse staff
• Seasonal and temporary workers
• Overtime and shift premiums tied to base pay

For the food and drink industry, wage pressures interact with wider challenges including retailer pricing power, supply contracts and automation decisions.” – Jenny Buchanan

7. Industrial & Manufacturing

“In the industrial and manufacturing sector, the rising National Minimum Wage has impacts well beyond entry‑level roles. When baseline wages increase, it compresses pay differentials and creates upward pressure on the rates of semi‑skilled and skilled workers who expect their experience to be recognised.

This comes at a time when manufacturers are already balancing tight margins, global competition, and persistent supply chain challenges. Shift‑based operations feel this most acutely, as higher hourly pay multiplies the cost of overtime, night shifts and weekend premiums – intensifying overall labour costs.

It is encouraging to see continued government focus on technical skills development, with £1.5bn earmarked for upskilling and training over the coming years. However, this doesn’t remove the reality that wage pressure will increase, combined with ongoing skills shortages, attracting and retaining talent remains a critical priority.” – Chris Webster

8. Professional Services

“Professional & accounting business services firms may not feel minimum wage changes immediately, but the effects build over time. Support roles, trainees, and early-career positions are often closest to the threshold.

Rising entry-level wages can put pressure on salary bands and progression frameworks, potentially leading to gradual salary inflation across wider teams. Even if the immediate impact seems small, over multiple recruitment cycles these changes can increase the firm’s cost base and influence long-term reward planning. Balancing fairness, career progression and commercial sustainability will be key as wage pressures continue to build.” – Joel Topham

9. Technology, Media & Telecomms

“In the technology and media sector, minimum wage changes tend to affect operational and support teams rather than specialist roles. But for fast-growing businesses, even limited exposure can add up quickly.

Growth plans, funding rounds and scaling ambitions all rely on accurate cost forecasting. Wage increases can disrupt this if not planned for early. Pay consistency across roles and locations also becomes more important as teams expand.” – Liam Hosie

10. Construction & Real Estate

“Higher labour costs across construction supply chains, resulting from the minimum wage increase, will place further pressure on contractor margins, particularly for subcontractors operating in labour-intensive trades such as groundworks, bricklaying and general site labour provision. Mid-tier contractors and subcontractors are likely to feel the impact, as many operate under fixed-price contracts, which limit their ability to pass on higher labour costs in the short term. This will add further pressure to development viability, particularly for residential and lower-margin commercial schemes already facing cost inflation and financing challenges.

Beyond construction, facilities management, property management and estate services businesses will also experience direct cost increases where significant proportions of staff are paid at or near minimum wage levels, including cleaning, security, maintenance and concierge roles. These increased operating costs are also likely to feed through to service charges, adding further cost pressure for commercial occupiers.

On a more positive note, higher wages may support labour retention and recruitment in sectors facing persistent workforce shortages, improving delivery reliability over time.” – James Snape

4 ways you can mitigate the impact of rising wage costs

Although the level of exposure will differ across sectors, the steps available to manage increased wage and NIC costs are broadly consistent.

1. Taking early action- reviewing your cost base strategically can make a meaningful difference. For example, revisiting remuneration structures and introducing or expanding salary sacrifice arrangements – such as pensions, electric vehicles, cycle-to-work schemes or private medical cover – can reduce the gross salary on which NICs are calculated.
2. Consider Government support- It’s important to ensure you are fully utilising available support, which includes the enhanced Employment Allowance, which may significantly reduce your overall employer NIC liability if you qualify.
3. Operational efficiency- reviewing workforce structures, investing in automation or digital tools, and considering whether certain functions are best delivered in-house or outsourced can all help create a more flexible and resilient cost model.
4. Working arrangements- implementing flexible or hybrid working arrangements may also support savings in overheads while strengthening attraction and retention.

Ultimately, the businesses that take a proactive, data-driven approach – modelling different scenarios and planning ahead – will be best placed to protect margins while continuing to invest in growth.

How AAB can help

Changes to the UK national minimum wage can feel daunting, especially when margins are tight and workforce costs are already under pressure. While early preparation is recommended, it’s important to make decisions with a full understanding of the options that are relevant to your business. Speaking to advisors promptly will help you review these options and identify solutions that add real value to your organisation.

That’s where our team comes in. We work alongside businesses to get the full picture, looking at your people, processes and finances together. By drawing on expertise across AAB – from business advisory, people and employee benefits, payroll and employment taxes, to corporate finance – we bring the right knowledge together to identify the best solution for your business. This ensures your plans not only respond to the immediate national minimum wage changes but also position your business for long-term growth and sustainability.

If you have any queries about the April 2026 increase in employers NIC on your sector please do not hesitate to get in contact with one of our heads of sector, or your usual AAB contact.