An increase that is above the rise in average earnings will see the adult minimum wage reach £4.50 an hour and the youth rate increase to £3.80, the government announced this week. The Low Pay Commission said 1.3million-1.6m people across the UK stand to benefit from these increases in October this year.

Trade and industry secretary Patricia Hewitt also provisionally accepted a recommendation for further increases in October 2004 to £4.85 an hour for adults and £4.10 for the youth rate. These raises could benefit up to 2.5m people.

But the news has come as a blow to farmers' representatives.

The National Farmers' Union (NFU) said the increase will add £34 million to the wage bill paid by farmers.

The £4.50 rate is up from the rate of £4.30 set by the Agricultural Wages Board. Agriculture is the only industry where the minimum wage is set above the current NMW and wage rises have particular impact on horticulture where the wage bill can be up to 60 per cent of costs.

NFU employment and education chairman Bob Fiddaman said farmers and growers fully accept the need for permanent staff to be well skilled, trained and paid. He added: 'However, for unskilled casuals, which are an essential element for some businesses, this is rise represents a major increase in costs for no increase in efficiency' ' Given the rise in the NMW, the NFU asked the Agricultural Wages Board to take a responsible approach when it negotiates a new order shortly. In particular we will be asking for the board to accept the new harvest worker definition and to amend the starter rate definition to overcome the problems with the loss of the casual worker definition.

'We will also be asking for the order's implementation date to be postponed until October to coincide with the change to the NMW Meanwhile, retailers warned that setting the NMW to £4.85 for 2004 is taking a huge risk on the future of the UK economy, with potentially devastating effects on retail job creation and costs – especially for small and medium-sized retailers.

Bill Moyes, BRC Director General said: 'By provisionally accepting a recommendation to raise the NMW to £4.85 in early 2004, the Government is breaking its promise to not make rises in NMW without due regard to the economy, levels of employment and inflation. This follows from a recent significant increase in the level of the NMW.'