Small businesses are stretching themselves thin to cover rising employment costs, with the majority absorbing the cost of the national living wage by taking lower profits.

According to the Federation of Small Businesses, 59% of small firms absorbed increased wage costs through reduced profitability, while a quarter reduced staff hours and 23% cut investment.

The retail and wholesale sectors were among those that said they were particularly impacted by the national living wage.

Kay Desai, who runs a Nisa Local in Tongham, said the living wage is a key issue for the convenience sector.

“I employ a number of people over the age of 25 in my store, so the living wage puts a substantial burden on business,” she said.