THOUSANDS of businesses in the south will see their operating costs rise from next week on the back of an increase in the national minimum wage.

Pubs, hotels and restaurants, as well as other companies that rely heavily upon shop floor or other 'blue collar' workers, could be where the changes are felt most keenly.

business services giant KPMG is warning that the national minimum wage increase on Wednesday from £4.20 to £4.50 an hour, could up operating costs by more than one per cent of turnover.

It is urging small businesses, particularly those in the service sector, to ensure they have accurately forecasted for the increased wage costs.

Staff costs often represent 20 per cent of turnover for service sector businesses, where many employees earn the minimum wage.

The seven per cent increase to £4.50, together with the attendant rise in National Insurance costs, could mean that anything between one per cent and 1.5 per cent of turnover will be eaten up by the increase.

Tony Cottam, senior partner at KPMG's Southampton office, said: "For companies operating on relatively small profit margins, an increase in costs of one per cent of turnover is likely to have a significant impact upon profits.

"Companies need to factor the increase in to their financial projections for the coming year and perhaps consider raising the hourly rate for senior staff who may expect an increase to preserve pay differentials."

However, the increase may help ease the difficulties companies find in retaining good manual workers - increasingly a problem area for small to medium-sized enterprises.