Why Britain's wage rise is driving work overseas

On 1 April, around 2.7 million British workers woke up to a pay rise.

The National Living Wage climbed by 50p to £12.71 an hour for over-21s, the latest step in a steady march of increases that have meaningfully improved the baseline standard of living for some of the country's lowest-paid people. 

Young workers celebrated on social media. Union leaders called it a step in the right direction. Politicians pointed to it as proof that the system is working for ordinary people. 

They're not wrong. Increasing wages is absolutely the right move. No employer worth the title should argue otherwise. But let's not pretend this is happening in a vacuum. 

In this article, Alex Fenton, group CEO of The Legends Agency, examines how rising minimum wage levels are influencing hiring decisions and what this could mean for the future of the UK labour market.

The other side of the wage rise 

Behind the headlines, Britain's small and medium-sized businesses are sitting with a calculator and a sinking feeling. According to a report from KPMG and the Recruitment and Employment Confederation (REC), higher payroll doesn't materialise from thin air. When the minimum wage rises, so does every associated cost attached to it, not least National Insurance contributions, which have already added close to £1,000 per employee per year following recent hikes. 

For a sole trader employing a small team, that's a meaningful hit. For an SME with 50 staff, it can be the difference between a growth plan and a survival plan. 

These aren't faceless corporations with cushioned finance departments absorbing the blow. They're the founder sweating over a spreadsheet at midnight, the owner who knows every member of staff by name, the director who took no salary last month so everyone else could get paid. 

The options nobody wants to talk about 

So what do you do when the wage bill rises, and the revenue hasn't? 

The textbook says you have choices. Pass the cost on to consumers through higher prices. Tighten staffing structures: fewer hours, shorter shifts, a harder look at overtime. Stop hiring. In the worst cases, start letting people go. 

None of these is a good outcome. Raising prices risks losing customers. Cutting hours hits the very workers the legislation was designed to protect. Freezing recruitment quietly closes a door that younger workers were counting on walking through. 

This is the central tension that policy announcements tend to gloss over. The best wage in the world doesn't help if the job no longer exists. 

Not everyone agrees with this argument. Professor of Economics at the London School of Economics, Alan Manning, argues that there’s no evidence to blame youth unemployment on the higher minimum wage. He also suggests there’s an economic argument for a higher minimum wage for older workers. 

When domestic costs push decisions offshore 

Businesses are already juggling rising costs, stubborn inflation, and slower growth. Add higher wages into the mix, and suddenly those 'nice-to-have' plans – hiring, investment, expansion – start slipping down the priority list. Or heading overseas altogether. 

This trend has already started. According to a report by KPMG and REC, businesses are making decisions about the UK creating jobs here or abroad right now. SMEs, including many that would never have considered it five years ago, are building teams abroad. I have launched my company, The Legends Agency, in Cape Town, South Africa, not because I’m chasing cheap labour or abandoning my responsibilities, but because the domestic equation has stopped adding up for me. 

South Africa, in particular, has become a serious destination for this kind of strategic hiring. Native English speakers, a time zone that sits just one to two hours ahead of the UK, a highly educated workforce, and salary savings of around 50% compared to London equivalents. For an SME owner staring down a widening cost gap, that's a real lifeline.  

The quiet restructuring of the British workforce 

The broader picture should concern anyone who cares about the long-term health of the UK labour market. 

When SMEs can't grow domestically, they don't just stand still; they restructure, automate, or look elsewhere. Investment that might have funded new UK roles gets redirected. Graduate schemes that looked promising on a spreadsheet get quietly shelved. The entry-level positions that give young workers their first foothold become the first casualty of a cost-cutting exercise. 

Over time, this creates a hollowing effect. The jobs that remain in the UK become more senior, more specialised, and harder to access for those without experience. According to CIPD’s Labour Market Outlook, the drop in the number of vacancies can drive competitiveness at the top of the Labour markets and reports suggest there are signs that overseas firms looking for experience with more affordable salaries are recruiting here.  

The bottom rungs of the ladder get sawn off, ironically, for the people a higher minimum wage was supposed to help most. 

None of this is inevitable. But it requires joined-up thinking that goes beyond headline wage figures. 

What protecting British jobs looks like 

If the government is serious about protecting British jobs, it needs to be just as serious about backing British business. 

That means looking hard at the cumulative weight of regulation and cost being loaded onto employers in a short space of time. It means considering what reliefs or incentives might help SMEs absorb wage increases. It means treating business owners not as obstacles to fairness, but as the engine through which fair wages actually get paid. 

The workers who received a pay rise this April deserve it. Nobody sensible is arguing against that. But if the conditions that allow businesses to employ them are steadily eroded, the pay rise becomes beside the point. 

Higher wages are only meaningful if the jobs are still there. And right now, for a growing number of UK businesses, keeping them there is getting harder by the year. 

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