Small businesses should be reassured by the fact that the government has not decided to increase the national minimum wage above the rate in growth of average earnings.

On Wednesday, the prime minister told parliament that the national minimum wage for those over 22 will rise to £5.73 an hour from October of this year.

Commenting on the announcement Chris Hannant, head of policy at the British Chambers of Commerce, explained that the moderate rise was good news for smaller firms.

He said: "As we move into more uncertain economic times and credit is squeezed, businesses, particularly smaller enterprises, will be operating on tighter margins.

"It's important that the Low Pay Commission ensures fair pay, but it must continue to balance this against the ability of employers to cope with the additional financial burden."

The Federation of Small Businesses also said it was pleased with the rise as it does not replicate previous above inflation increases.

With some exceptions, the vast majority of workers in the UK aged 16 or over are entitle to be paid a minimum amount per hour.

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