A series of above-earnings increases to the UK's National Minimum Wage have made it one of the highest in the world, exceeded only by France and Australia, according to the CBI.

In its submission to the Low Pay Commission, the CBI argues that the minimum wage's increasing coverage of the labour market has achieved its aim of establishing a 'floor' for lower paid workers.

The CBI is calling for only a modest increase to the minimum wage next year, and says that the cumulative impact on firms not just of increased minimum wage costs but also of new employment rights must be taken into account.

It says the ability of some firms to employ more staff or invest in the business is impeded, as is their scope to reward other staff for good performance or career development. Certain sectors are particularly affected by minimum wage increases: retailing, farming and agriculture, social care, food manufacturers, hospitality and catering, textiles and hairdressing.

John Cridland, the CBI's deputy director general, says: "The CBI's concern that a rapidly rising wage 'floor' would squeeze pay differentials above it has become a reality. Firms now have less financial headroom to reward good performance and incentivise staff to take on new responsibilities or participate in training.

"Employers are in favour of a minimum wage which stays relevant and enables those at the lowest end of the labour market to maintain their standard of living, but the increases must always remain affordable for the whole economy."