The Forum of Private Business (FPB) has welcomed the government’s decision to limit this year’s increase in the national minimum wage, saying it was time that a sense of reality intruded.

The government accepted the Low Pay Commission’s recommendation that the minimum wage rise this year should not outstrip the average increase in wages. Nick Goulding, chief executive of the FPB, said that the minimum wage had increased far more than average wages since it was introduced in 2002. "It’s good to see that, finally, a sense of reality is intruding," he said.

Goulding added: "In recent years, the 25,000 private businesses that the FPB represents have been bombarded by escalating costs due to red tape, the rise in national insurance contributions and higher fuel costs. Next month, they will have to cope with the administrative costs associated with an increase in maternity leave and the ban on smoking. In future, smaller businesses are also likely to face new pensions obligations and longer employee holiday entitlements."

He pointed out that, when the minimum wage was introduced, employers recognised the need to tackle low pay. However, since then, the minimum wage had rise by 27.4 per cent in four years, compared with an estimated wage inflation of 17 per cent.

Goulding said that the Low Pay Commission has drawn attention to the fact that, for the first time since the introduction of the minimum wage, there has been a small fall in the number of jobs in the low-pay sectors. "We hope the government, when thinking of putting more burdens on smaller businesses, will consider factors such as this, particularly since ministers are aiming to encourage single parents and the long-term unemployed to find jobs," he said.