UK’s “Real Living Wage” to Jump Nearly 7 %

In a significant move that reflects the mounting pressures on households and employers alike, the voluntary “real living wage” set by the Living Wage Foundation will rise by 6.7 % nationally to £13.45 per hour and by 6.9 % in London to £14.80 per hour from next year.

According to a report by the Financial Times, the increase directly affects approximately half a million workers across more than 16,000 accredited employers — spanning sectors from retail to leisure. Beyond this core group, the new rate is expected to exert a broader influence: many companies benchmark their entry-level pay against the “real living wage”, and unions often reference it in pay negotiations.

Why now?

The Living Wage Foundation said the uptick reflects not only higher living costs, including energy, food, and rent, but also evolving expectations of what constitutes a decent standard of living — such as increased spending on childcare or family activities.

Analysts note that in the current economic climate of constrained wage growth and persistent inflation, voluntary higher-pay agreements are gaining traction as a way to stem in-work poverty.

Employer implications

For a full-time employee working 37.5 hours a week, the national increase translates into roughly £2,418 extra per annum compared with the statutory minimum wage. In London, the differential rises to about £5,050. While many accredited employers support the move, growth in accreditation has slowed amid rising labour and tax costs.

For businesses already operating on thin margins — particularly in hospitality and retail — absorbing higher pay rates remains a challenge.

Wider context

It’s worth noting that the “real living wage” is separate from the legal National Living Wage, which the UK government sets for workers aged 21 and over. That statutory rate is expected to increase by around 4.1 % to £12.71 per hour in April 2026. The gap between voluntary and statutory minimums is therefore likely to widen, further highlighting the role of the Living Wage campaign as a benchmark for decent pay rather than a legal floor.

What this means for HR and business leaders

Employers who are already accredited will need to update payrolls and budgets to reflect the new rate from next year.

Non-accredited organisations may feel growing pressure — from staff, unions, or the broader labour market — to close the pay gap.

For workers, the raise offers a tangible boost, though given the ongoing cost-of-living squeeze, it may still fall short of broader financial security goals.

From a strategic standpoint, firms willing to invest in higher pay may see benefits in staff retention, productivity, and employer branding — though they must balance this against cost pressures and operational realities.

Looking ahead

As the cost-of-living crisis continues to test households, the voluntary living-wage movement is expected to grow further in influence. Businesses, especially those in low-margin sectors, will need to assess how elevated wage norms align with productivity strategies and long-term workforce planning.