Leading business groups have criticised Labour’s plans to increase the national minimum wage (NMW) to £8 an hour by 2020, saying it would harm job creation and long-term economic growth.

The CBI said on Sunday that the NMW was already at the “highest rate it can be without putting job creation at risk”.

Katja Hall, deputy director general of the CBI, said:

“Raising wages in this way would put serious strain on businesses, particularly hard-pressed smaller firms with tight margins, which would end up employing fewer people.”

The NMW has recently outstripped growth in average earnings, rising from £5.93 an hour in 2010 to £6.31 today. It is due to increase to £6.50 an hour by October.

The British Chambers of Commerce (BCC) said that the NMW must rise, but that it would be detrimental for government to force an increase.

John Longworth, director general of the BCC, said:

“Businesses are in favour of an evidence-based approach to the minimum wage rather than political parties using it to gain support from voters”.

Both business groups stressed that the Low Pay Commission were already responsible for balancing the NMW with job creation, with Mr Longworth adding:

“Politicians should instead focus on implementing policies to raise productivity and improve skills in the workplace, which are the keys to higher wages for all.”

But is Labour’s pledge really that drastic?