A group established to oppose the previously proposed 9.9% rise in the minimum wage has said it is ‘relieved’ the increase has been moderated, but warned that businesses will still face significant challenges.

However, following a dramatic political reversal earlier this year, Tynwald has now approved a five percent increase, taking the current rate to £12.86 per hour from April 1.

The Youth Rate, for those over compulsory school leaving age but not yet 18, will rise to £10.16 per hour.

The change came after Chief Minister Alfred Cannan tabled an amendment replacing a proposed two-phase 9.9% uplift with a single 5% rise, alongside a commitment to ‘substantial’ increases in personal tax allowances in the Budget.

His intervention followed a week of upheaval in Manx politics, which included the dismissal of Treasury Minister Alex Allinson as part of a January reshuffle.

At the time, Mr Cannan said he and Dr Allinson had ‘diverged considerably on a number of policy matters’ and that the situation was ‘now too ingrained to recover ground’.

Dr Allinson was replaced by Chris Thomas, who subsequently secured Tynwald’s backing for the revised rate.

Employers had warned that the original planned hike would lead to job losses, reduced hours and business closures.

During the debate, Mr Cannan told members: ‘How much more do you think businesses can take?’

Brett Martin, secretary of the Local Economy Forum, said the revised increase was a step in the right direction but cautioned that pressures remain.

‘I think everyone in the local economy is relieved that the increase in minimum wage has been moderated, but many sectors are still going to find the new levels challenging,’ he said.

‘The all-up cost of minimum wage from April is going to be pretty similar to the UK, and everyone can see what’s happening there, even before the latest increase to £12.71 works through.

‘Over 100,000 jobs lost in the hospitality sector since 2024, unemployment levels growing fast, job vacancies tanking, and youth unemployment the worst in more than a decade.

‘The bottom line is that you can’t tax or legislate your way to prosperity.

‘Everyone wants to see higher living standards, but you can only sustainably achieve this through economic growth and to get this you need an environment where businesses can thrive.

‘I think our government has now started to recognise this imperative by slowing the runaway train on minimum wage and putting more money into people’s pockets with the recent changes in tax allowances. More needs to be done in the future but at least we’re now on the right road.’

The minimum wage has increased by around 60% over the course of the current administration, with government stating that the rises reinforce the island’s commitment to fair pay while maintaining competitiveness as a place to live and work.

A government spokesperson added the Department for Enterprise offers a range of support schemes for local businesses, including funding, training and advisory services aimed at improving productivity and reducing costs.