Trade secretary Stephen Byers has announced that the minimum wage will be increased from £3.70 to £4.10 an hour from October 1.

Speaking in the Commons he said: "The minimum wage has been a success, with 1.5 million benefiting without any negative consequences for business."

There will be a further increase in the rate to £4.20 from October 2002.

The Low Pay Commission submitted its report to the government on whether there was a case for increasing the national minimum wage following consolations with employers, unions and other interested parties.

The CBI had urged the commission not to use the minimum wage as an "escalator for forcing up pay levels", warning that consultation with its members shows a figure in excess of £4 an hour could be extremely damaging to business.

Unions have called for the minimum wage to be set at higher levels, with Unison calling for a figure of £5.00 an hour as a step towards a rate of half male median earnings of £5.10 an hour.

The Association of Convenience Stores has strongly opposed a 10 per cent rise. Chief executive Trevor Dixon said a rise of that scale "would add significant additional costs to retailers, which they simply cannot afford to bear. Those in rural areas where wages are lower will suffer particularly."

He also warned that research showed retailers had cut back staff hours due to the introduction and subsequent increase in the minimum wage. He concluded that "many retailers would have to make similar cuts, or lay-off staff, or even close stores, in the event of an increase of this scale."