Introducing a National Living Wage could hit poorest parts of the country as businesses cannot afford to pay their staff could cost nearly a million people their jobs over the next decade, it has been warned.
The new wage, which will rise pay to £7.20 an hour from April and £9 an hour by 2020 and will be compulsory for over-25s, could hasten the closure of more than a quarter of Britain's shops and accelerate the loss of nearly a million jobs by 2025, the British Retail Consortium (BRC) said in its report.
BRC chairman Sir Charlie Mayfield said "there was nothing particularly wrong" with the increase to make the minimum wage 60% of the country's median average income but said higher pay in London skewered the figure and could hurt businesses elsewhere.
He told The Today Programme: "The median earnings in London are very, very different to median earnings in other parts of the country.
"The chances of that having a bigger affect on employment on areas which are economically weaker are greater. That's concerning. It's a bit of a blunt instrument."
The BRC report said the higher wage, a economic flagship policy of George Osborne's, has "sound intentions but could fail on implementation”.
Though retailers broadly support the higher wage, it could cost the industry up to an extra £3 billion each year by 2020, the report predicted.
Around 74,000 of the UK's 270,000 shops could close by 2025, it said, with "economically fragile" areas of the country hit hardest.
"I do very much believe that persistent low pay needs to be tackled, which is why we're talking about 'fewer but better' jobs," Mayfield said.
"What the National Living Wage does is that it increases the pace at which wages will rise - and by the way that's not a bad thing, it's in many ways a very good thing but it will also probably accelerate some of the changes within the workforce and the responses that retailers make in order to mitigate some of the rising cost pressure that they're seeing."
The BRC noted the changing nature of retail, noting how the digital revolution meant 15% of sales are now made online and there are around 40,000 fewer shops now than a decade ago.
The National Living Wage will hit shops in the poorest part of the country, the BRC warned
BRC chief executive Helen Dickinson said: "As an industry we expect the years ahead will see accelerating change.
"Retailers will develop better propositions and compete harder across an increasing range of business models from modern multi-channel formats through to discounters and online businesses.
"Recent policy announcements, in particular the National Living Wage and the introduction of the apprenticeship levy, will increase the pace of some of these changes."
A Treasury spokesperson said the Office of Budget Responsibility, an independent body, was expecting employment to rise by 1.1 million by 2020.
They said: "The Government is making sure workers in Britain get a pay rise by introducing the National Living Wage from April this year.
"We are already seeing record employment rates and more people in employment than ever before."
The BRC is due to release two further reports - one on what retail workers think, and another on how the industry can meet challenges and take advantage of new opportunities.