Wage costs and your price list: pricing in the next rise early

Wages rise on a calendar; most price lists do not. If your next price review happens after the cost has landed, you have already sold a quarter of the year at the old margin.

1. The problem: labour cost arrives on a schedule, the squeeze arrives late

The National Living Wage rose 4.1%, or £0.50, to £12.71 an hour on 1 April 2026 for workers aged 21 and over (GOV.UK). That step was announced months ahead. Yet many owners only notice it in the management accounts in May or June, as a slightly lower blended margin.

The blended figure hides where the damage is. A labour-heavy product with a thin margin absorbs the same percentage rise as a high-margin one, but it has far less room to do so.

2. The authority: costs are still moving

The pressure is not confined to pay. Producer input prices rose 6.1% in the year to August 2026, while output prices at the factory gate rose 3.7% (ONS). Costs are rising faster than the prices businesses charge. The next ONS producer price release is due on 21 October 2026, so it is worth reading before your review.

The Bank of England held Bank Rate at 3.75% in September and expects CPI inflation to rise to around 3¾% in the fourth quarter of 2026 (Bank of England). It puts underlying private sector wage growth at around 3½%. Cost pressure is not a one-off for the April step; it is the planning backdrop.

3. The solution: find your labour share by product group, then decide once

Take your five largest product groups and calculate, for each, labour cost as a share of selling price. Include direct labour, employer on-costs and the time spent on set-up and handling. Then apply the expected increase to that share only.

For illustration: a product selling at £100 with £30 of labour faces roughly a £1.20 rise if labour costs go up 4%. If its margin is 8%, that is a 15% cut in profit per unit. A product with £10 of labour and a 25% margin barely notices.

This gives you a sorted list. At the top are products where the price must move. In the middle are those where a higher minimum order or better scheduling is enough. At the bottom are those where you need do nothing. One decision, made by the owner in a week, on numbers rather than instinct.

4. The principle: plan on the trend, not on the last reading

The Bank of England does not plan around a single month's pay figure. It looks at underlying wage growth, around 3½% against a recent reading of 2.9% for private sector regular pay in the three months to July (Bank of England). The same logic suits a price list: build the allowance from the trend and the known calendar, and revisit it when a new release changes the picture.

Tips and tricks for this week

• Calculate labour as a percentage of price for your five biggest products.
• Put the price review date in the diary before the cost change, not after it.
• Check your minimum order quantity against the cost of a small run.
• Give customers written notice of price changes well ahead, and explain the cost behind them in one sentence.
• Pick one monthly indicator, such as gross margin on your top five products, and track it every month.

If you want a quick view of where your margin sits, there is a short Business Health Check.