Ikea Group will next year begin paying its staff in Britain a living wage above the compulsory level set out by the government this month, the world’s largest furniture retailer said yesterday.

In his first post-election budget, British Finance Minister George Osborne announced a compulsory living wage for workers aged over 25, starting at £7.20 an hour when it is introduced next April and rising to £9.35 by 2020.

The privately-owned Swedish company, known for its flat-pack, self-assembly furniture, said it would instead pay all of its UK workers the level set out annually by The Living Wage Foundation, making it the first national retailer to do so.

That will see all of its UK staff, including those under 25, paid a minimum of £7.85 an hour from April 2016, with those in London paid at least £9.15 an hour. Ikea said this would impact more than 50 per cent of its 9,000 workers.

“This is a huge step for the British retail sector and we hope that many other businesses will follow the leadership Ikea is showing on the issue of basic pay,” Rhys Moore, director of The Living Wage Foundation, said in a statement.