Pubs are set to face a huge salary burden following a 30p an hour hike in the minimum wage.
Yesterday the government accepted recommendations put forward by the Low Pay Commission to grant a new minimum wage for adults of £4.50 an hour.
The new rate, which will come into force in October, will be followed by an increased wage of £4.85 an hour in October 2004 - a rise of 15 per cent over two years.
The move has sparked outrage from many in the pub industry who believe that it will restrict growth and put even more financial burdens on licensees.
Association of Licensed Multiple Retailers (ALMR) spokeswoman Kate Nicholls said: "The Low Pay Commission's recommendations bear little resemblance to economic reality.
"Its increase for this year is almost double the rate of inflation and the rate at which average earnings are growing.
"In the current economic climate, such an increase is not justified and it will undoubtedly bite.
"This further reinforces the ALMR's call for big hikes in the national minimum wage to be capped at a realistic level."
The Federation of Small Businesses, which has 4,500 licensee members, believes the knock on financial effects will be huge.
Spokesman David Bishop said: "Licensees are already faced with increases in national insurance, insurance premiums and will now have to pay £4.50 an hour.
"Many licensees will not be able to recoup costs because they are tied into long-term leases."
Tony Payne, chief executive of the Federation of Licensed Victuallers' Associations, said: "A lot of licensees don't earn that type of money themselves. It's going to be another big cost to the licensee and will lead to job losses."
After the last increase to £4.20 in 2002, a survey of 1,000 licensees by The Publican revealed that just over a third of licensees believed it was more than they would like to pay and in some cases it would cause hardship.
This week, trade and industry secretary Patricia Hewitt claimed that the new increased wage move would not hinder employment prospects in the industry.
She said: "We are committed to eradicating poverty pay for all without jeopardising job prospects.
"We are confident that this increase will not have a detrimental effect on either employment or the wider economy."
But some members of the trade have called on the government to recognise it will put more costs and pressure on licensees.
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